Private Equity Homebuilders

Private Equity Funds Lending to Homebuilders

Private equity funds are offering some much-needed financing to homebuilders.  The banking industry is still recovering from the financial crisis and lending too little.  In the absence of traditional bank lenders, private equity funds are stepping in as a lifeline for homebuilders and seizing an opportunity for high returns from the interest on the loans.

Investment funds and a handful of lenders held court in a corner of the Las Vegas Convention Center, receiving a throng of homebuilders looking for a financial lifeline.
The event, held over four days during the International Builders’ Show, was meant to address a key industry roadblock. Homebuilders have seen land development and home construction loans all but dry up since the financial crisis erupted in the fall of 2008. Many have had to walk away from half-finished projects or even shut down.

Now some private equity funds, seeing the potential to charge up to 20 percent interest, are cautiously bankrolling some projects, despite the danger that the fragile housing recovery could stall.

“It’s a very opportune time to make loans,” said Craig Manchester, managing partner of Sentinel Capital. Manchester said he charges builders between 12 to 15 percent, plus fees. “A year from now, two years from now — who knows — there may be other lenders who are competing against us, driving our pricing down.”  Read full article

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Tags: homebuilders, home building, construction, private equity funds construction, construction firms, private equity homes, private equity houses

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