How to Raise Capital for Your Shopping Center: 3 Tips for Success

You’ve done your homework, know the market and have a solid business plan. Now it’s time to raise capital for your shopping center. That may seem like an insurmountable task – after all, who will invest in a property that doesn’t even exist yet? However, you’re not the first developer to face this challenge. Those before you have managed to succeed by following some simple tips on how to raise capital for a new shopping center. Read on for three tips on how to protectors can facilitate financing so your project is off to a good start from day one.

Plan Your Financing Strategy From the Start

If you’re trying to raise capital for a new shopping center, you’ve likely been planning for quite some time. While the goal is to get the project up and running as quickly as possible, it’s important to consider financing options as soon as you have a basic plan for your shopping center. Having a clear financing strategy in place from the start will save you significant time and effort down the road. It’s a good idea to create a general timeline for financing your project. That way, you can make sure you’ve given yourself enough time to obtain funding and complete construction on time.

Create a Solid ROI for Investors

To raise capital for your shopping center, you’ll need to show investors that they’ll get a good return on their investment. Ideally, you’ll be able to provide a positive cash flow as soon as the center opens its doors. You may also want to include a leasing strategy in your business plan to give investors a general idea of the types of tenants you plan to bring to the center. You’ll want to show them that you’ve done your research and know the market well. Your shopping center’s Cap Rate (or Capitalization Rate) is an important factor in determining the overall return on investment for an owner. It’s a measurement of the ratio between net operating income (NOI) and the capital value of the property. If you’re looking to raise capital for a new shopping center, your goal should be to achieve a high Cap Rate.

Show Investors You’re Committed to the Long Term

You may have an investor who’s willing to put money into your shopping center project today. However, you may come across another investor who may only want to invest in your project if it’s part of a larger portfolio. If that happens, you may be tempted to take the money that’s available now, even though it’s less than what you were hoping to receive. You’ll want to be careful not to jump at the first offer you receive. Instead, you should be willing to wait for the investor who has money available for a longer-term investment. This will show him that you’re committed to the long term and will likely make him more likely to invest in your project.

Ensure There’s Adequate Debt Coverage

Before approaching investors with your project, you’ll want to make sure you’ve factored in adequate debt coverage. In short, you’ll need to make sure your monthly payments are low enough that you’ll be able to cover them with your cash flow. You’ll also want to make sure they don’t exceed a certain percentage of your gross revenue. If you’re building a new shopping center, you’ll need to make sure you’re following the rules and regulations about debt coverage. Failure to adhere to these rules will make it very difficult for you to obtain financing for your project.

Summing Up

To raise capital for a new shopping center, you’ll first have to find investors who are willing to take a risk on your project. You’ll need to be able to prove that your project will generate a solid return on their investment. You’ll also need to show that you’re committed to the long term, and that you have a sound plan for managing debt coverage. If you’re able to follow these tips, you’ll be well on your way to raising capital for your shopping center. And once construction has begun, you’ll be able to see your project come to life before your eyes.