What are the key factors to consider when choosing a real estate debt fund partner?

1 Track record and reputation

You want to work with a debt fund that has a proven history of delivering on their promises, closing deals on time, and providing consistent and transparent communication. You also want to check their reputation in the market, and how they treat their borrowers and other stakeholders. Ask for references, testimonials, and case studies from previous clients, and do your due diligence on their financial strength, legal compliance, and ethical standards.

2 Loan terms and conditions

You need to compare the loan terms and conditions offered by different debt funds, and see how they match your project goals and needs. Some of the key variables to look at are the loan-to-cost (LTC) ratio, the interest rate, the origination and exit fees, the maturity and extension options, the prepayment penalties, the recourse and guarantees, and the covenants and reporting requirements. You also need to understand the underwriting criteria, the appraisal process, and the closing timeline of each debt fund.

3 Alignment of interests and values

You want to partner with a debt fund that shares your vision, values, and expectations for your project, and that can provide you with strategic guidance and support throughout the development cycle. You want to avoid potential conflicts of interest, misalignment of incentives, or hidden agendas that could jeopardize your relationship or your project outcome. You also want to establish a clear and mutual understanding of the roles and responsibilities of each party, and the decision-making process for any changes or issues that may arise.

4 Flexibility and creativity

You want to work with a debt fund that can offer you flexibility and creativity in structuring your loan, and that can adapt to changing market conditions, project challenges, or opportunities. You want to avoid rigid or cookie-cutter solutions that may not suit your specific situation or goals. You also want to work with a debt fund that can provide you with additional capital or services if needed, such as mezzanine financing, equity co-investment, or construction management.

5 Relationship and trust

You want to build a long-term relationship and trust with your debt fund partner, and not just treat them as a transactional lender. You want to work with a debt fund that values your business, respects your expertise, and listens to your feedback. You also want to work with a debt fund that is responsive, accessible, and transparent, and that can resolve any issues or disputes in a professional and constructive manner.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?