In many instances corporations are interested in completing new construction “build-to-suit” facilities that meet their operational needs. In this case, corporations work with a group of specialized developers to bid out the project. Investors, such as EGM, work directly with developers to determine pricing, basis, and lease structure driven by the property’s location, construction budget, and the corporate tenant’s creditworthiness. Developers look to the capital markets, structuring expertise, and access to capital of partners, such as EGM, to determine an optimal capital structure for both construction and permanent financing upon completion. This partnership is a credit enhancement to the build-to-suit transaction by providing the developer balance sheet support in the form of a mezzanine loan and the construction lender with a forward commitment to purchase the property upon completion. The tri-party structure permits the collective parties to lower the all-in cost of funds. The developer is motivated to sell the property to free up borrowing capacity for new development opportunities, to bid on the next request for proposal (RFP), and to collect fees without taking market risk or loading up on high cost debt.
