How Net Lease Developers Benefit By Partnering With PSF
Completing a project on time and on budget is absolutely essential to net lease developers and their tenants. Uncertainty in either of these areas is what causes developers to lose sleep.
If you drill down into the causes of development delays and developer anxiety, one of the primary culprits is financing. The time and effort it takes for developers to raise equity and then go through a traditional bank’s underwriting process can push project timelines that impact their ability to complete the project on time and ultimately allow the tenant to open for business and start generating sales.
PSF borrowers have consistency and transparency in our underwriting going into the closing of the loan, and supreme comfort in the fact we have long-term committed capital, which means confidence to tie up more sites and, ultimately, getting more leases signed.
Traditional Financing For Net Lease Developments
The majority of net lease development is still capitalized through traditional banks and pass-the-hat equity raises. With so much at stake, developers can be reluctant to alter their approach if they have long-standing banking relationships and an existing investor network.
Historically, banks are rigid in their terms - which doesn’t always align with the complex reality on the ground (i.e. building permits, lease agreements, entitlements, etc.) - or the bank’s attachment point is so low, they aren’t fully focused on the success of the project.
Meanwhile, investor documentation, reporting, and communication demand time, effort, and dollars away from the projects themselves. Traditional capitalization of net lease development deals creates a lot of cooks in the kitchen.
We launched Paramount Specialty Finance (PSF) to solve the inefficiencies in this market and give NNN developers credit for putting together great deals by offering complete and programmatic capital stack solutions for their projects. Through a true long-term partnership mentality and up to 100% Loan to Cost financing, developers are able to expedite the closings, get more leases executed, and pursue new client relationships. This isn’t our opinion; we hear this feedback all the time from our clients and partners.
Focused Time For Net Lease Developers
When developers are pulled in too many directions, everyone loses. Response times lag. The quality of work is compromised. And the amount of stress and anxiety builds. The most common consequence is missed deadlines and project delays, which are frequently to blame for budget overruns.
Our approach is to streamline the financing, due diligence, and closings to give back time to developers so they can focus on what they love and what they’re best at. Our in-house closing team led by Chief Operating Officer Orlagh Sinisgalli has close to 200 build-to-suit loan closings under their belt, and they know how to get them over the finish line. We’re not looking for ways to kill a project. We find solutions to quickly and reliably finance new deals.
Financing With Clear Data For Net Lease Developers
Saving time and money for net lease developers has helped us close more than $850 million in transactions across ~200 net lease loans with zero foreclosures since 2015. Beyond that, we provide developers with an open book cost of capital analysis on every deal.
The data in this model explains our terms and how we price, and we compare it to what a traditional capital stack looks like based on a developer’s assumptions.
With this information, developers can make a clear-headed decision on how they want to proceed. Based on the fact that 65% of our borrowers were repeat borrowers in 2020, it tells us that our program and our platform has fundamentally changed the sector, and we are continuously engaging and funding new net lease developer relationships across the country.
If you’re curious to learn more about our approach, please contact Matt Valdez, our head of business development, at valdez@paramountfin.com or by calling him at (512) 656-5179.