STRATEGY

Capitalization

Traditional purchases consist of a conventional loan and owner equity.  This simple approach, while quite customary, can be very inefficient and often a more expensive way to procure the investment.  We believe that intelligent blends of cash, debt, and equity tailored to meet the specific objectives of the management plan provide a much more solid financial footing for the investment.

The 1st loan (primary loan) typically represents the largest component of the overall investment.  Our capital markets experience and extensive lender network gives us a distinct advantage in choosing the most appropriate financing structure.  Given today's uncertain lending climate we have expanded our thinking to include seller financing and assumable loans to mitigate execution risk.

We apply and adjust the following simplified approach to capitalizing each investment:

  • 1st loan = core capital with highest advance / lowest cost (traditional lenders, assumable loans, sellers)
  • 2nd loan = for capital improvements / lower cost (sellers, private debt lenders)
  • Equity = scarce resource (cash from members or exchange proceeds

Proper Capitalization
ensures financial health
to achieve project objectives

  • C=Capitalization

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