PBO-OBS FUNDING OPTION III
VC -JV FUNDING MODEL III
Investor Group looking to invest in projects or companies that seek capital and have a good Return on Investment (ROI). This Provisional Fund Injection is provided in the form of Venture Capital (VC) and Acquisition of JV Equity with an exit strategy for a predetermined period.
- UPFRONT FEES
: USD 10M UP TO 5B
: 30 TO 60 DAYS
: 60 TO 120 DAYS
: 5 TO 10 YEARS
: APPROX. 6-8%
: 4% SUCCESS FEES
: JV EQUITY
The percentage of equity participation to be acquired for the capital injection will be determined in accordance with the proportion between the Investment and the company participation valuation.
PROJECT FUNDING TERMS & CONDITIONS
Standard Joint Venture Terms to make the procedures clear to prospective Project Owners. Please note that every deal is different. These Terms of the Agreement are intended to be a guide only for a standard transaction.
For the purpose of this sample, we are using a USD 100M project funding example.
Investment Partners : 75%
External Management Group : 20%
Project Owner : 5%
A Senior Debt of 75% will be provided by Investment Partners at a rate of 7% per annum and for a period of 5 to 10 years. An additional 5% distribution and commission fee is also due for the first year and based on the amount borrowed the first year. Effectively, the total interests due for the first year are 12% and 7% for each additional year.
A Junior Debt will be provided by a Management Group of 20% at the same interest rates as the Senior Debt with a combined JV equity participation that may vary from 30% to 50% in the project.
The Project Owner must provide a minimum of 5% of the total amount and will have 50% equity in the project and handle all daily operations regarding the construction and development.
The first repayment is due after 12 months and then annually until the end of the Agreement. The associated funds are usually provided as a “line of credit” and can be used as needed monthly to ensure a minimal amount of debt service costs. An example of how this could be useful is if the Project Owner is getting entitlements done for which a small amount of capital can be used.
A USD 35,000 Underwriting Fee (for US projects ONLY). Outside the US, a Third Party Underwriter is used in coordination with Inhouse Underwriting as required for an average fee of USD 60.000. In High Risk areas, this fee is USD 150.000.
Procedures & Guidelines
A routine site visit will be carried out quarterly and as needed (paid as a Construction Management Fee).
The signed contract will be delivered within 14 days after the site visit, after which the first tranche will be disbursed within 30 days.
A nominated Construction Management Company will manage all construction for a fee of 3.5%. This is not paid on acquisition – only on construction costs. A nominated Construction Management Company is an oversight to protect the interests of the Investment Partners & the Management Company. Please note that 25% of this will go to the Project Owner for their part in the development of the project.
The nominated Construction Management Company will NOT act as “boots on the ground” management of the project. That is for the General Contractor who will be selected and managed by the Project Owner. This nominated Construction Management Company is also an asset to help the Project Owner as much or as little as he requires. These experts all have extensive experience in large scale development & accounting and will distribute funds from an account in coordination with the Project Owner. Accounting will supply monthly reporting to the Project Owner, who may have the project audited up to twice a year by an accounting firm of his choice.
The Management Company will be provided as an ultra-premium unit in the finished construction and will manage the property or HOA if there are no conflicts or desires by the Project Owner, which can be discussed.
The Investment Partner's preference will be either to sell or refinance the minimum amount to clear the debt service and retain as large an equity position as possible. However, they are flexible in this regard. For example, if the Project Owner would like to cash out, they can refinance or sell the entire project.
Neither the information nor any opinion contained in this website constitute a solicitation or a direct offer by PBO-OBS Global Advisory Group. These are solely for informational purposes and reflect the Terms and Conditions of various Third Party Partners with whom we work on a case-to-case basis. These Terms and Conditions may also vary from time to time depending on various factors where we do not have any control or influence and therefore these Terms and Conditions do not represent any final commitment. Clients must be aware of the need to update them and to confirm at the time of project application.
“FUNDING -III” HIGHLIGHTS
In this very successful Investment Model, the Investor seeks to create a Joint Venture (JV) for the funding and its management. The created SPV (Special Purpose Vehicle) is the entity responsible for the loan and its repayment schedule. This means that the Parties (Investor and Project Owner) are collectively responsible and share these responsibilities (loan interest and all other project costs) according to the Joint Venture Equity percentage.
Using the example of a USD 100M capital injection, where the shareholding ownership is 50:50, and the annual interest rate is 7%, this means that the total annual interest rate for the Project Owner is actually only 3.5%.
Please also note that the capital injection is carried out in the form of a line of credit. Therefore, interest is only charged on used capital in accordance with the tranches drawn from the total credit line.
Finally, and most important of all, once the JV Partnership has been successfully completed, a Project Owner will gain access to unlimited funds for future projects with a professional and proven Investment Partner with already clear and known conditions, significantly improving a Project Owner’s ability to plan future projects strategically.
We, PBO-OBS Global Advisory Group, considering the different options available in today's financial market, would highly recommend this project model.