Refinance Land Scenario
www.arrivatollc.com – On a daily basis, our family office or consulting entity is approached with opportunities. Most of them are not a fit for what we are working on principally these days, but we have a lot of friends and personal relationships within the industry through our various businesses or through other family offices where we can align interests.
We see our share of crazy requests, but always have a soft spot for solid people looking to execute a fundamentally sound strategy in a local or regional market…everyday business that creates wealth.
I was recently introduced to a group of business partners who owned a business that they were ready to exit. They owned their own real estate with one building and a lot of open space within a heavily traffic area. They were looking for a $1.4 million loan to refinance their property, allowing them to work through the entitlement process that would not only increase the value of the property, but allow the owners to sell the property to a developer who would execute a much better use for the property and execute a re-development.
They went into this process expecting to pay 10% – 12% – especially since they were looking for 60% leverage on the existing value of the land.
I liked these guys right away. They came to me prepared with a clear summary of who they were, what they were doing, and their proposal. They also provided me some of the fundamentals behind the transaction and themselves.
Here is what I found.
They had three (3) strong borrowers in terms of credit. Although many of these loans are not credit-score based in the private finance world, we always look to see how reliable the borrowers are. They also had very stable Personal Financial Statements. They also offered some additional collateral. When we see a few strong borrowers willing to sign on the loan and bring additional collateral, it shows us a serious group of people. These are not dreamers looking for friends and family money.
Here is what we did for them.
One of my friends runs a private family fund that loves small balance transactions like this one and can get very creative with multiple strong borrowers and collateral. We had a quick decision and within 15 minutes as we discussed a 15-year term with an interest rate of just under eight (8%) percent, despite the fact they will pay off the loan within one (1) year. Of course, this would be pending underwriting, but we are rarely surprised since I require a complete package before I ever decide to have a conversation. It’s amazing how quickly transactions can move forward when you are fully transparent on day one.
The bottom line is we are always willing to help people if we see an alignment of interest with a personal relationship of ours and most importantly – if you respect our time. Our day job is running our family office – which is a 24/7 endeavor with our acquisition strategy in multi-family real estate, our economic development projects with municipalities and universities, as well as our other portfolio companies, and speaking engagements.
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