Opportunity; 

Millions in financing was originated in 2002-2004 on small or midsized commercial and office properties which will be coming due as most loans made during this period were 25 year amortized with 7 year calls, falling due 2009-2012

Existing regional banks which are usually the source of financing for these properties will be unable to extend or roll these loans over as they are also the usual source for residential construction lending and the quantity of bad loans on their books requires an extraordinary amount of reserve cash.

These banks will also be subject to intense scrutiny by regulators, meaning they will have only limited discretion in lending.

If purchased and financed 7 years ago, these properties retain solid equity in spite of the slide in residential values, due to their income production.

If a fund is positioned to provide a solution that clears the due debt and restructures the ownership of the property there is an opportunity to deliver relatively safe and above market returns to the investor for the initial 5 year term, and higher returns in the following five years. 

Method;

We propose to raise private capital for the purpose of paying off due loans on leased commercial and office developments through a combination of land acquisition and chattel loans (UCC, personal property encumbrances).

The property is appraised at today's value; the land under the improvements is then purchased by the fund at the tax assessor's allocation of proportionate value. The balance of funds required to pay off the due loan are advanced and secured on the improvements to the property.

The land is then NNN leased to the development owner at 1% monthly for 5 years with a 5% purchased option to buy back the land at market value or acquisition price, whichever is greater, at the end of the 5th year. Alternatively, the lessee may exercise one additional 5 year extension by paying 5% of the acquisition price.

The chattel lien is recorded with the Secretary of State, the terms are 10-12% amortized for 20 years, provides for assignment of rents upon default and the provision that default on the lien constitutes default on land lease.

Ideal Customer; 

Investor/Owner of several small to mid sized leased retail or professional office developments, with one or more credit tenants. The fund would then have an owner/operator and a single owner/tenant with which to deal. 

Ideal Investor; 

Any individual who wants to obtain monthly/quarterly income in the 6-7% per annum range together with upside long term capital gains, providing optimum security and reserves without the expense of insurance.

Advantages to the Customer;

In the absence of market liquidity, he will be able to pay off existing financing and keep his property.

The triple net lease charges are back charged to the tenants upon renewal of leases.

There is already a negotiated provision to reassemble the land and improvements for the purpose of refinance or sale.

Should the landlord want or need to sell his interest, both the note and the lease are assumable with application approval.

As the property and it's income stream are the qualifying entity, minimum paperwork is required for due diligence.

Funds can be placed quickly as the lengthiest part of placement will be the appraisal to be ordered from the MAI Appraiser. 

Advantages to the Investor; 

Cash flow to the fund can commence within 60 days of first funding.

Costs can be partially prepaid by the property owner in the form of option payments and prepaid debt service.

Costs of management and servicing of the funds can be paid primarily out of cash flows instead of front load.

If the appraisal shows sufficient equity after pay off of bank loan, funds can be deposited as prepaid lease/interest to insure performance of the payor.

Should default occur, summary eviction of the manager/payor is a relatively simple process and the roster of tenants provides a back up list of manager/payors.

Should the property be repossessed, the fund will have acquired it at wholesale pricing due to the quick amortization of the UCC chattel lien.