Housing Giants - October 24, 2008 - (Page 22)

f e at u r e ADc Loans? Use Your Imagination. Acquisition, development and construction (ADC) financing is viewed by lenders as a huge risk right now, Tony Avila told the home builder audience in attendance at the Professional Builder Benchmark and Avid Leadership Conference earlier this month. Avila is a senior advisor with Americrest Homes/ Falcone Group. “You have to go and establish relationships with the little lenders who may not have current exposure to real estate,” he said. Daniel Barnaba Jr., president of Syracuse N.Y.based Eldan Homes, told builders at the conference that banks have been asking for equity up front, a situation he hasn’t encountered before. “ADC loans have been very difficult to get from traditional sources,” said Barnaba, whose firm acts as a land developer as well as a home builder. “And when you can find it, you need to put a significant amount of equity into the project.” Barnaba believes that venture capitalists could serve as an alternative source of financing for builders, “especially for land deals. The money is available, but [venture capitalists] typically want a higher rate of return than the banks.” Also at the conference, Charles Sheron, chairman of Atlanta-based The Sheron Group, said although there still is liquidity in the marketplace, it’s difficult to find because many banks are also in survival mode. “We’re only limited to our imagination,” he reasoned. “Our industry has always come up with solutions and will do so again in this market.” Foreign and Sovereign Funds: A capital Source? Ernst & Young’s 2008 Real Estate Market Outlook is predicting that the U.S. will be attracting “huge capital flows” from investors from countries such as Ireland, Sweden, France, Australia and others increasingly looking beyond their own borders for investments. “It’s the Canadian dollar’s parity to the U.S. dollar that’s bringing Canadian investors back to markets like Phoenix, San Francisco, Denver, Palm Springs and resort areas in Florida to buy single-family homes, condominiums and timeshares, mostly as second or vacation homes. Rapidly increasing oil prices are providing petrodollars to invest in U.S. and other real-estate markets for the first time since the late 1970s and early 1980s. The rise of the Islamic banking sector has also created additional demand for real-estate as an investment. A strong Euro and British pound are bringing European buyers back to both commercial and residential markets in droves.” The Ernst & Young report makes this additional observation: “A rapidly emerging subset of the global capital wave is sovereign funds investing on behalf of national governments. Look for sovereign fund investors to potentially outdo their private equity rivals in the U.S. real-estate and emerging market investments. Look for some sovereign investors to seize the opportunity to focus on distressed assets and companies, particularly smaller and mid-sized home builders in the U.S.” 22 HOUSING GIANTS.10.24.08 www.HOUSINGGIANTS.cOm http://www.ey.com/Global/assets.nsf/International/Industry_Real_Estate_Market_Outlook__2008/$file/Industry_Real_Estate_Market_Outlook%20_2008.pdf http://www.housingzone.com/probuilder/info/CA6369493.html http://www.housingzone.com/probuilder/info/CA6369493.html http://www.falconegroup.net/index_americrest.htm http://www.falconegroup.net http://www.eldanhomes.com/ http://www.sherongroup.com/ http://www.housinggiants.com

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