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RBC Builder Finance's lending activity focuses exclusively on
products that are designed to fund single-family
residential construction projects. Our financing products include
single-family residential construction loans, residential land acquisition
and development loans including land and finished lot facilities,
participating debt loans and small builder loans. Additionally, RBCBF is
developing a Syndicated/Participating Credit program to facilitate the emerging
trend of lender consolidation with larger residential builders.
Residential Construction Loans
RBC Builder Finance's construction loans target single-family residential
builders serving first-time homebuyers or first-move-up homebuyers, whose
markets have stable and broad market appeal. These loans do not typically
exceed 80% of the loan to value of the homes being constructed. The loans are
originated on single-family, primary residences, the majority of which are
pre-sold, with a limited number of speculative starts or model homes. No resort
or second homes are financed.
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12-month term
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Appraisal/Evaluation process used for cost effectiveness for customer
Land Acquisition and Development
Loans
RBC Builder Finance originates loans for lot development suitable for homes
that it finances for construction. Land acquisition and development loan
principal amounts usually do not exceed 75% of the appraised value of the
finished lot. RBC Builder Finance limits the number of lots to no more than
18-24 months' projected starts and, therefore, the term of the development loan
is limited to such period. No multi-phase projects, large planned unit
developments or raw land are financed. Projects must be fully entitled and have
an acceptable Phase I Environmental Report.
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RBC Builder Finance will not make raw land loans on which no development is
planned
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RBC Builder Finance will finance the development of what it projects to be no
more than an 18-24 month supply of lots
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RBC Builder Finance will only finance development of land that has entitlements
necessary to begin and complete development and on which development is
expected to begin immediately upon closing
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Engineering Review and Inspection Fees at Borrower's expense
Developed Lot Facilities
RBC Builder Finance also provides developed lot facilities. These facilities
provide homebuilders funding for the bulk acquisition of already developed
lots, upon which they can immediately begin construction. These facilities are
an extension of the RBC's A&D lending activities in that they have the same
interest rate and term structure.
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12-24 month term
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RBC Builder Finance will extend credit to a homebuilder for the purpose of
warehousing fully developed lots to help supplement a homebuilder's inventory
of lots
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May be made as separate lines of credit, or, in certain cases, may be
represented as sub-limits under a development construction loan
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Not to exceed the lesser of an LTV of 75% or an LTA cost of 85%
Land Loans
Land loans are not a standard RBCBF product offering. However, on rare occasions
they can be considered. RBCBF recognizes the land availability issue for
mid-market builders attempting to buy in growth markets. The environment is
becoming disadvantageous for mid-market builders since the larger builders are
able to purchase the land with cash and land availability is becoming less
accessible to the middle market builder through option contracts and
non-specific performance sales requirements. The marketplace today does warrant
consideration of tolerance to finance land for short terms. RBCBF will consider
land loans that are for no more than 6 months initially, include 40-50% cash
equity, and an LTV of no more than 50% on a discounted basis.
Mezzanine Debt Loans
RBC Builder Finance also provides homebuilders
mezzanine debt loans for usually up to 20% of the appraised value of the
project. These loans are junior only to other RBCBF facilities and supply
homebuilders with an alternative to raising equity capital from third parties
to fund their projects. Mezzanine debt loans satisfy the last claim capital
requirement and provide builders with a one-source financing option. RBCBF's
mezzanine debt loans are an extension of the RBCBF's other facilities and most
frequently accompany A&D loans.
Small Builder Loans
To enhance RBC Builder Finance's ability to provide a full breadth of products
to the single-family construction industry, RBCBF also extends credit to
small homebuilders that construct between 5-50 single-family residential units
per year. RBCBF firmly believes, that as a supplemental lending program in new
and existing markets, this program appeals strongly to the small homebuilder
community at several different levels.
Syndication Credits
RBC Builder Finance offers syndicated credit facilities that consolidate
bank debt using one document
with common terms and structure. Syndicated credit facilities benefit customers
through easier administration of the loan through a centralized agent. This
reduces compliance reporting, number of bank contacts and the monitoring
of different credit terms.
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