While interest rates for commercial real estate financing remain low, lender underwriting criteria remains very stringent. Lenders require substantial equity, guarantees, as well as strong tenants and general contractors when financing commercial real estate transactions. As a result, creative techniques are required when developing the capital stack of a commercial real estate transaction. One technique to attract equity to a project is to maximize the value of the federal tax benefits of the transaction. A partnership \u201cflip\u201d structure may be used to initially provide an equity investor 99.99% of the profits and losses from the development of the transaction. At a time when the equity investor receives a target yield the interests \u201cflip\u201d and the interests of the sponsor and investor are adjusted to reflect the intended \u201cback end\u201d equity ownership of the equity investor in the project. For the right investor this partnership \u201cflip\u201d structure can enhance the internal rate of return to the investor by combining cash flow with the cash value to the investor of the losses generated by the development of the project.<\/p>\n","protected":false},"excerpt":{"rendered":"
While interest rates for commercial real estate financing remain low, lender underwriting criteria remains very stringent. Lenders require substantial equity, guarantees, as well as strong tenants and general contractors when financing commercial real estate transactions. As a result, creative techniques are required when developing the capital stack of a commercial real estate transaction. One technique … <\/p>\n