Investment Concept

    The consolidation of the savings and loan industry in the late 1980’s was followed by an era of tightening regulatory pressures and conservatism in the banking industry which has created a gap in the financing options historically available to homebuilders which has yet to be adequately filled.  As a result, even the most successful builders are faced with viable projects which cannot be financed through normal channels – projects where there is a high degree of confidence in the project’s marketability, but where institutional debt financing is not available unless there is an infusion of equity capital beyond the capacity of the builder alone. 

    PC Homes was created by it's Principals to fill that gap in the capital structure of home development projects for experienced homebuilders.  PC Homes provides “bridge” or “gap” financing for builders operating in market segments which we believe to be viable, now and throughout the forecast time horizon of the project.  Gap financing is the amount of financing, in addition to the homebuilder’s own capital investment,  required to obtain from financial institutions the acquisition, development, and construction loans necessary to complete the project. 

    The projects we typically finance include those which provide entry-level homes, generally among the lowest priced in a given community, as well as the first-time and second-time “move-up” homes.  We also consider projects that occupy a particular market niche such as in-fill sites or a project that is unique based on certain marketing criteria such as marketing window (e.g., frontage on a high traffic roadway), high levels of presales or location in a highly regarded school district.  For example, new condominium development in the redeveloping heart of the city of Chicago has proven to be strong, reliable investment for the last four years.  Nonetheless,  PC Homes has funded projects in Illinois, Florida, Minnesota, Virginia and Arizona.

Investment Structure

    After being provided with a detailed Private Placement Memorandum describing the project, investment structure, participants and a forecast for venture operation and forecast return, PC Homes’ investors fund a limited partnership through either the purchase of promissory notes or units of limited partnership interest. Promissory notes are repaid (principal and interest thereon) prior to any distributions to the limited or general partners. Therefore, the limited and general partners participate in the overall profitability of the partnership. The limited partnership vehicle is used to insulate the investors from the builder and building risks, to ensure limited liability and to achieve the goal of being a passive investment for the limited partners.

    The partnership enters into either a joint venture agreement or a loan agreement with the builder which provides for a return of the partnership’s investment, a risk-appropriate, minimum return on that investment, and/or an equitable split of the development’s profits are what PC Homes’ investments in development projects are structured to provide.  In turn, PC Homes furnishes its investors with a substantial risk-adjusted return on their investment. 

Builders' Profile

    PC Homes enters into joint ventures with seasoned, professional homebuilders – those who have experienced and learned from the cyclical home-building marketplace.  Such builders typically have organizations proficient in the numerous skills required for successful development ventures:  site identification, acquisition, product design, job costing, bidding, sales and marketing, quality control, customer service, etc.  A qualified, straight-forward developer who will communicate frequently and honestly is critical to a successful project.

PC Homes Total Involvement

    Prior to investment, PC Homes commits considerable resources to market research, project screening, negotiations, due diligence, legal structuring, etc.  PC Homes is committed to ongoing involvement and supervision of it's investments (e.g., traffic and  sales reports, construction and cost monitoring) and communication with it's investors (e.g., periodic investor correspondence, marketing reports, investor distributions, tax returns, financial statements, etc.).  PC Homes’ expertise, experience and ongoing stewardship are critical to maximizing the potential for success.

Sussex County Portfolio

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