What about the land, if you own it, does that count?
Absolutely, it factors in. This will probably satisfy the bank as it can be used as collateral against the loan. But for investors, it’d probably have to be structured that the land is contributed as an investment to the project. Essentially, if the project goes belly up, you’ll end up losing the land along with the investors losing their money. Then as an investor it’s probably just as good as you putting in $3M. There is a waterfall in cap tables during liquidation. The debt holders always get first dibs, and then the equity holders get what’s left. An investor will want to know that they’ll be in the same boat as you if they are going to put money in.
I’m not familiar with how Kane structures his projects / investments. But he can have his investors pay into a pool of money, and that money is directed across all of his projects by the company. Or, he can set up each project as standalone entities and have investors pick which projects to invest in. This is very similar to how a lot of PE or venture capital firms are set up (it’s one or the other). The benefit of the 1st is that it minimizes risk to the investor. If a project fails, no big deal, as it’s 1 out of many, but the return if the project succeed will be lower. You as an investor will also have no say in how your money is directed. The benefit of the 2nd obviously is the returns on a successful project for you is greater, but the risk of a single project failing is also way higher. You also get to choose which projects you jump in on so there is some level of personal control (real or imagined)
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Not sure where to put this, but Kane Realty just sold the Dillon for $236 million. Hope they put that money into Smoky Hollow, phase 3 (and 4)!
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