Are Small Public Companies The Answer To Real Estate Credit Market Crunch?
By Anne Bradstreet
LOS ANGELES, November 19, 2008:(AN) With the vice-like grip the current economic crisis has on the real estate development credit market, it seems that everywhere you look these days there are bankrupt developments, peppering the landscape, frozen in time. But alas, a fresh concept on the rise may just be the answer to developer’s current dilemma: Small public companies designed for the purpose of providing investment capital for real estate developments. And by emphasizing their strengths, in a particular development niche, rather than trying to shot gun the entire market, they reinforce the chances of success.
Small public companies have an advantage over large lending institutions in other ways too. For example, small public companies can provide equity based investments for investors through joint ventures with developers rather than investments with capital providers such as commercial lenders. This arrangement gives the small public company much greater flexibility, increased reaction time, and the ability to provide better service to the developer. Moreover, since these projects are typically smaller and leverage-free, they are much easier to manage and provide the safest and most profitable investment for the company, and its investors.
Omni Ventures, Inc. (www.omniventures.biz) has plans in the works to be just one such company. We spoke to Omni’s CEO, Hollis Cunningham, who engaged San Diego based company Going Public (www.gopublicpros.com) in September of this year to take his company public. After more than 45 years in real estate development, Mr. Cunningham has literally seen it all. “I’ve watched interest rates go from 8% to 21% overnight”, he explained, “and I’ve seen times when 90% loan to value loans dropped to 60% percent of cost in the blink of an eye.”
These kinds of erratic unexpected changes in the finance world can be devastating to developers who rely on traditional lending institutions for needed capital. But through joint venture partnerships concentrating on real estate developments that compliment their strengths, small public companies can provide a sound economic platform from which developers can thrive, even in today’s volatile economic environment. For example, since Mr. Cunningham has a strong relationship with the Native American Indian Tribes in the Mid-Western and Western areas of the United States, he plans to focus the efforts of Omni Ventures in providing equity funding for Native American Projects.
After watching the vicious credit market take its toll on real estate developers across the United States, the small public company concept providing capital for the real estate development industry is definitely looking like the wave of the future.
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