Posted by Sue(NC) on January 29, 2003 at 15:24:09:
The building has sparked interest in the investment community and the price is quite good - so the property will not go back to the bank as an REO. And they know this. So I would be trying to get them to loan again on something that failed them once…and at a higher loan amount.
I have NOT talked with the seller personally, but have left messages with him. He is considerably ‘upsidedown’, with a second that will likely not be made whole - even with competitive bidding.
Posted by Sue(NC) on January 29, 2003 at 11:45:51:
I posted on the Financing forum as well…but I’ll ask for ideas here, too!
Wow…It’s been awhile. I used to visit (&post) all of the time a few years ago… But I’ve been busy investing
But I was wondering if anyone knew of a good & flexible commercial lender…
The property I’m looking at is an office building in foreclosure. It’s likely to sell around 2M. Unfortunately, under those terms of sale, it’s difficult if not impossible to get much income history from the current owner.
I do have rent rolls (and unfortunately, a company owned by the current owner also leases about 10% of the rentable space). I also am a part owner of the building next door, so I know that the rents are reasonable. And the vacancy rate for our adjoining building has been quite low despite the unfavorable rental climate… it seems that there is a bigger demand for class B-C office space, versus the overbuild class A stuff.
I’m looking at a cap rate of about 16% at the price of 2M.
Here are my limitations and abilities:
I have quite strong financials.
I will need to close within 30 days of the end-of-bidding.
I can likely get the Phase I quickly.
I will NOT have the owners tax/income history.
I will NOT have copies of any existing leases.
There are some city-mandated updates that will need to be completed by 2006. I don’t mind escrowing for these, but would like it if the escrow were built into the purchase price/downpayment numbers so that I keep my leveraged position. Of course, I would do the deal even if that part won’t work.
Posted by ray@lcorn on January 30, 2003 at 16:01:13:
Sue,
Good to have you back!
I agree that this is a bank deal. The most aggressive bank I know of in your area is BB&T. I work with them here in VA and have been surprised with the flexibility they have shown. They use a “city executive” structure that gives wide latitude to the local branch in developing relationships, which is their main focus. I’ll be glad to get you a referral to the exec in your area if you want to email me your contact info.
Have you talked to the owner of the second? If they are facing certain losses then they may be more amenable to discounting now rather than taking their chances at the sale. Much depends on who they are… some of these lenders will surprise you. I’ve seen them stand there and bid beyond reason, knowing that all they have to pay out of pocket is the first lien.
Posted by Steve O on January 29, 2003 at 13:20:53:
You should start with the lender on your current building. Another place would be with local banks that understand your market. The current holder of the building may have some interest in talking with you also.
Posted by Sue(NC) on February 03, 2003 at 19:23:08:
BB&T was actually the first mortgage holder- although the loan was not made by the branch in my city.
So when I called the distant city, they were totally uninterested. But your advice was on target - the local office was thrilled to have the inquiry, and seem quite positive for lending on solid, local investments.
On a sad note, the second holder (who had NOT protected their equity in another building with the same borrower & same 1st morgage holder) came unto the scene late, and bid the property to 200K over BB&T’s assessment of market value… 700K over their assessed ‘quick sale’ value.
I don’t think the game is over yet (as the 2nd holder surely doesn’t want ownership in the end). It may even be positive - some of the other foreclosure bidders will not track the property after the sale. And now I have time to make some good contacts.
Posted by Sue(NC) on January 29, 2003 at 14:44:47:
I know my current lender on the other building will not accept all of the conditionals - but it’s my intention to refi after a year or two to that lender…
I’ve also tried the note holder that’s foreclosing, and their interest is tepid, as they no longer have a strong appetite for this type of loan.
I used to have contacts with a couple of local banks, but unfortunately I’ve lately had a lot of cash that needed to be invested for tax purposes. So I haven’t needed loans. I kept in touch for awhile - but both of my contacts left their respective banks. And I failed to forge relationships with their replacements (poor planning )
Posted by ray@lcorn on February 04, 2003 at 11:11:09:
Sue,
After I posted that answer I had the thought it sounded like a BB&T loan… and that doesn’t surprise me about the second. Very interesting, keep us posted!
Posted by Steve O on January 29, 2003 at 14:57:24:
If your plan is to get the property performing, you could approach the existing holder with a short term plan. This plan could be to take it on a lease/option or a purchase with their help for 1-2 years. Since you have th building next door, you can show a reasonable track record to them. You never know… they do not want to do the loan but… they may not want this property in their lap.
Have you talked to the current owner that is being foreclosed on?
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