In the past, obtaining development financing for commercial real estate (CRE) projects and properties was a tough slog for small and large developers, alike. The recent change in securities regulations that have now gone into effect for 2021 make it a whole lot easier to generate interest and create the opportunity for developers to obtain capital financing on agreeable terms.
New Securities Regulations Hidden Gems Make Capital Financing Via Public Markets More Reliable
The securities regulations changes include two important provisions – entirely new rules that allow for advertising and pre-solicitation of the investing-public (under strict rules to be sure) before the developer makes an exemption election regarding registration with the SEC.
Rule 241 Solicitations of the Investing-Public
Under the new Rule 241, businesses and commercial real estate developers can provide advance communications on a broad solicitation basis to the investing-public regarding their proposed financing needs. This important channel can be definitively exploited to create interest as well as create a backlog of prospective investors if an offering ever gets underway.
Rule 148 Demo Day Presentations
The new Rule 148 provides developers with the opportunity to work with a Demo Day sponsor to host in-person or virtual presentations to qualified investors before the offering documentation is filed, thus also creating the opportunity to receive funding offers as well as create that all-important backlog of prospective investors who may form the core of the offering subscription base when (and if) the offering is in fact launched.
Combining the Rules to Increase Probability of Success
These two new rules – applied in combination – have the power to dramatically improve the probability of success odds well above those owing to commercial bank financing, local bank financing and credit union financing approaches historically used by CRE developers.