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Is there a list of preferred or aligned senior lenders working with GroundBreak that borrowers will be expected to work with? If so, what happens if a borrower wants to work with a senior lender that isn’t on the list? Additionally, how do you envision the origination partners will engage/work with the senior lenders?
We expect that there will be a set of aligned lenders who have been approved to utilize the guarantee on senior commercial debt. However, there will not be restrictions on working with other lenders if they align with the GroundBreak financing model and goals. We envision that the origination partners would engage/work with senior lenders as they have historically worked with similar partners in the past.
Will the guarantees be available to the originating partners or just for the senior lenders? If the latter, what happens if an originating partner winds up being the senior lender?
Right now, we anticipate the guarantee pool being available to senior lenders to expand their CRE lending. We are still working with potential lenders — beginning with commercial financial institutions — on how to structure the guarantee. The guarantee pool will only be available to lenders who have a lender agreement in place.
How will the grants work? Do they go directly to the borrower from GroundBreak? Will there be a competitive selection process or will they be made at GroundBreak’s discretion?
Grants are meant to supplement the developer’s equity, as described in the RFP, and go through the origination partner not directly from GroundBreak. The origination partner will have approval to draw down funds from GroundBreak’s grant pool and deploy it to borrowers who meet the criteria established by GroundBreak with engagement from the origination partners.
Can you provide any more detail on what a “mutually negotiated origination fee” for the originating partner might look like? (For example, percentage of LCPCP allocated, percentage of LCPCP deployed and/or under asset management, annual set amount, etc.)
We anticipate providing an origination fee in the range of 1-2% of the total loan amount approved.
We understand that GroundBreak is to pay the origination partner an origination fee to help cover costs to underwrite and service the subordinate loan. Could the origination partner choose to charge the borrower an origination fee of 1-2%, as well?
One of GroundBreak’s goals is to change the current practice where every lender layers on additional fees that are passed along to the borrower. We expect to work with the origination partners to ensure that they are appropriately compensated for originating and servicing these SPCP loans so additional fees won’t be necessary.
We see that the origination fee would be negotiated with GroundBreak to cover costs to the partner and would cover the staffing and servicing of the loan. Does GroundBreak have a percentage or range in mind for the origination fee?
We have reached out to organizations who manage similar loan pools to get their feedback on best practices, but we anticipate paying origination partners around 1-2% of the loan amount originated to cover the cost to deploy their allocated capital. Origination partners will have the ability to set their own interest rate as long as it is below market rate that can cover ongoing loan servicing.
Aside from the origination fee, are there other ways that GroundBreak is proposing to help partners cover their costs related to creating the “robust ecosystem” of support that is outlined in the scope of work, such as technical assistance, predevelopment support and other due diligence, legal assistance, etc.?
The primary intent of this RFP is to select origination partners who can successfully deploy subordinate debt to complete the neighborhood commercial development projects envisioned by GroundBreak in a timely and streamlined manner and with appropriate compensation from origination fees. Applicants should have a successful track record of completing similar transactions and navigating the existing ecosystem.
GroundBreak hopes that origination partners will become part of an even more robust ecosystem and work with GroundBreak’s emerging Commercial Real Estate Development Strategic Impact Committee to assess and define the further needs and supports needed in that regard. As we live into this work, GroundBreak is committed to collaborating with origination partners to identify resources for any additional capacity-building needs that emerge.
Is the capital allocated to partners recourse or non-recourse? If it is recourse, how are partners protected from risk in case of a deal going wrong?
Non-recourse.
How would a partner be compensated for their technical assistance, predevelopment work, and other due diligence work if a project from the pipeline is investigated but ultimately not approved for financing?
The origination fee is intended to cover the incremental costs incurred by the origination partner to deploy successfully subordinate debt to complete the neighborhood commercial development projects envisioned by GroundBreak in a timely and streamlined manner. GroundBreak assumes that a core and essential part of applicants’ existing business is providing technical assistance, predevelopment work, and other due diligence on these types of projects and not a new, unfunded body of work.
The RFP focuses on commercial real estate development but mentions that developers may have housing projects, as well. Are projects through which BIPOC developers create affordable housing considered eligible?
Yes.
We gather from the RFP that the partner is responsible for project selection and pipeline development. Is there any compensation available for program marketing or other marketing support through GroundBreak?
GroundBreak expects to develop marketing and outreach for its programs and to collaborate with origination partners in this respect. However, we do not currently anticipate additional compensation directly to the origination partner for marketing. GroundBreak expects that the most competitive applicants will have extensive relationships.
Is the origination partner acting as the developer’s representative through due diligence to underwriting?
The origination partner is acting as a subordinate lender, not the developer’s representative.
The RFP outlines a 10-year loan term. Could an origination partner offer a 20-25 year amortization with a balloon payment?
Yes, however, the origination partner will be responsible for repaying the loans to GroundBreak at the end of the loan term, regardless of the terms that the origination partner provides to the borrower.
Section 3 of the RFP reads, “GroundBreak anticipates that origination partners will hold and service the loans and return capital to the LCPCP upon repayment at a 2% IRR.” What does IRR mean?
Internal rate of return.
The RFP reads, “Experience working on emergent, adaptive contracts and proven ability to build something new and pivot as needed.” What does this mean, exactly?
GroundBreak is looking for applicants who have experience working in a flexible environment — in other words, able to adapt their work and programs to meet changing conditions real-time, if necessary. Given that GroundBreak, the low-cost patient capital pool, and the role of the origination partners will all be new in 2025, we are looking for partners with a track record of innovation and flexibility.
Can origination partners work together on an RFP?
Nothing prevents origination partners from collaborating on an RFP.
