NEWS
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BULLETIN - Q1 2024 - DON'T SLEEP ON THE JOB, DO YOUR DILIGENCE!
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Just because we are hungry doesn’t mean we can be lazy too.
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Yes, we need to make our numbers to survive but we can’t forsake best practices to make a bad deal work. Be realistic when you are setting up new projects because, let’s face it, work-out is a painful and revealing process.
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Even the best of the best are faltering during this post-pandemic economic boondoggle. Regional production home builders are reporting they will not meet their sales projections this year. Developers in urban markets have stalled projects; their capital to advance projects eaten up by monthly interest. General Contractors are unwilling to utilize their credit relationships to order materials and secure deposits because they can’t be out of pocket and still make payroll. Protracted completion schedules are increasing General Conditions and Overhead. The list goes on and on, bottom line… we can no longer rely on ‘they’ve always finished their projects’ adage as justification for not comprehensively analyzing a developer’s ability to perform from the get-go.
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Trust but verify. Be diligent by establishing the expectation in the commitment letter.
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Always require a Total Project Budget enumerating all project cost, not just the bank’s portion of funding.
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Add contingency to the project budget and restrict it for bank use only – a little cushion just in case. The lender should not rely on the general contractor contingency; their allocation is typically for them to use only. If the project is managed by the Developer – aka self-performing – reserve a portion of contingency to off-set the general conditions, overhead and profit a general contractor would require if the bank is suddenly in a take-back position.
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More general contractors have been agreeing to deferred fee payments upon project completion. Some have numerous projects running concurrently with similar arrangements on all their projects; this financially stresses the general contractor and jeopardizes their ability to finish their projects. Further, the agreements have specific payment schedules which don’t always coincide with completion and sales. Lender management of fee arrangements is necessary. Lenders must include the fee as relevant in the Sources and Uses, the lender should be prepared to fund this expense when required.
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It’s important you are alert as we are weathering this inflationary cycle. We are going to see more than the standard water-cooler fodder; we want you to be prepared!
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Need a little pick me up, click here to register for a cup of coffee as a thank you for your continued business. We appreciate you.
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https://www.dcmi-midatlantic.com/wakeup
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PRESS RELEASE - JULY 31, 2023
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THE PLAINS, VIRGINIA – DCMI Mid-Atlantic, a real estate due diligence consulting firm, has been named a 2023 Top Financial Due Diligence Services Provider by Financial Services Review.
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This award recognizes the unique approach to construction finance project management DCMI Mid-Atlantic provides along with its superior commitment to their valued clients.
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As a team of general contractors, tradesmen, and OSHA-certified inspectors DCMI Mid-Atlantic specializes in unique and challenging construction projects and proficiently managing budgets and disbursements as a third party. This enables developers and builders to operate under accurate budgets for the project while protecting the banks’ investments.
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“We bridge the gap between construction knowledge and financial expertise by aligning the due diligence reports we prepare with the current economic climate and by forecasting future trends,” says Valerie Riccardi, Principal of DCMI Mid-Atlantic.
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DCMI Mid-Atlantic’s services include cost engineering, physical asset assessments, construction progress monitoring, environmental assessments, and construction management. It frequently acts as the lender’s representative throughout the construction process, supervising the financing process with the goal of preventing costly lending and investment errors.
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“Everything we do is to designed to help clients maximize their investments while minimizing risk,” stated Heather Compy, Vice President of Operations at DCMI Mid-Atlantic.
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The team at DCMI Mid-Atlantic primarily serves community banks in need of oversight and due diligence services. The company is now proud to offer fund control services for high-risk construction loans and U.S. Small Business Administration (SBA) clients.
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About DCMI Mid-Atlantic
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DCMI Mid-Atlantic was established to provide due diligence consulting that outperforms our competitors. In order to accomplish that objective, we focus on providing our clients the fundamental principles of value and service. We create value by utilizing our unmatched knowledge and results-oriented methodologies on every project. We are committed to providing unparalleled real estate due diligence consulting services to our clients. We pledge to build lasting relationships through quality performance, responsive service and reasonable pricing. This pledge applies to every project – commercial, multi-family residential, single family residential, or land development. That is our service.
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Contact
DCMI Mid-Atlantic Inc., 855.383.3264, office@dcmima.com
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