The Turks and Caicos Islands are heating up, as more developers move into the area to take advantage of the world class beaches, perfect year round temperatures and an ideal business climate. A number of developers have announced plans to build resorts in the country, primarily on the island of Providenciales. These resorts will not only bring more visitors and money to the island, but also more jobs for the local populace.
Who is Lending in the Caribbean?
The first question we get for those looking to develop in the TCI, is ‘who is lending’? This is one of the challenges for those looking to build a resort in the TCI and throughout the Caribbean. The banks are not interested in this type of speculative real estate, nor the large numbers usually associated with building a hotel or condo complex. This means we have to go to option B, private capital.
Our private capital comes from hedge funds in the US. These funders are bullish on the opportunities in the Caribbean region, and are more than willing to get behind projects that they see as viable projects. Hedge funds are much more willing lending partners than the big banks, however there are some key differences which you need to be aware of before jumping in with both feet.
Private Capital for Projects in the Turks and Caicos
There are a couple of differences between dealing with the banks and dealing with private capital. The costs of dealing with hedge funds is higher than the banks. The interest rates will be higher, fees will be higher and cost of entry will be higher; all things to keep in mind when determining whether this option may work for you.
Interest rates vary quite a bit depending on the project particulars, including location. The good news, is Turks and Caicos is a desirable location. Rates usually vary from 8-11%; this may seem high to some however keep in mind the banks are NOT lending on these types of projects today.
The second issue with hedge funds, is the cost of applying for a loan. Although the cost of due diligence is always bore by the borrower, some lenders will want these fees paid upfront (refundable minus costs) to ensure you have the funds to complete (and to make the client is committed). Other funds may let you pay the due diligence fees on your own (appraisals, feasibility studies, legal opinions etc), but will still want some non refundable fee upfront to ensure you are serious. Underwriting a project like this is a large undertaking, and doing this work for nothing while a client shops around is not a viable business practice.
At the end of the day, the client will have to decide whether they are comfortable with this type of situation where they are paying an upfront fee and not guaranteed success. Although this is the only option in the market today, it can still be a daunting leap of faith.
Talk to us today about private capital for your TCI project. We will give you the straight goods on what you can expect to get your project off the ground.
