BiggerPockets

Hello,
I am a commercial mortgage broker, have been for several years here in North East TN. As with everyone else in my field, up until this past year I had my core group of commercial lenders that I would go to with my clients deals, even a few local banks. Now no one seems to be lending or at least not lending unless it is on a perfect, cash flowing property and only to those who don't really need to borrow the money, just don't want to use their own money in the deal.
I have some clients who have purchased a mixed use building in a downtown, Main St. project, urban core with plans to rehab, lease and hold it for 10 years.( I have done 3 other deals with them over the years.) Currently the building is vacant but have a few "intent to lease's". What we are up against is the residential tenants don't want to sign a lease on a unit that is not built and the retail tenants don't want to sign a lease until they can see the infrastructure complete and suitable. I can understand that, makes good business sense to not sign anything sight unseen.
All my normal lenders and my not so normal lenders, even local banks, all want to do the take out and hold of this project, but no one wants to do the bridge or construction due to the current lending conditions, not these clients. These clients have great credit, good assets and some other R. E. holdings. However the hard money (14% and 5 points) makes the deal just not worth it for them. I am talking with the National Trust for Historic Preservation who does lend on newer buildings that are in the Main St. designated areas and they are willing to do a portion and be second lien holder which is great, just waiting on the paperwork and going through the process now. However that is only 35% of the needed funds to complete the project. My clients already have 200K of their own funds spent on the building between purchase down payment, preliminary demo and due diligence costs. I am looking for a true private investor, an individual or portfolio bank/lender who wants to make some money on this project. I won't tell you all the ideal terms that these clients are looking for because hey, all investors want to pay as little as possible, so I will tell you the fair terms these guys are looking for.
First here are some details on this project.
This is a 18,000 square foot, 2 story, 3 stories high (due to mezzanine level) mixed use building in down town Kingsport TN, on the second busiest street in the city. It was built in 1948 of all concrete and steel construction in a mild art deco style. The city inspector views it as one of the best, if not the best constructed building in the city. It has an iconic value to the city as well. It is in great condition structural wise, but needs to be brought to current code standards.
The subject too value will be between 1.2 and 1.3 million (I like to be conservative with my subject too values to be safe.)
They purchased the vacant building in 2008 with seller held financing for $340k, they put $135k cash down.
They have put another 100k plus into the project thus far of their own funds. As the building stands now it is valued at 500K.
The plan is to turn the building into 4 residential urban living lofts on the top floor, 2 retail spaces on the street level.
At a minimum the cash flow will be $9,800 a month the first year, at a maximum: $12,400 a month. (only $10 a square foot rent rate on the retail so it will fill fast.)
There is currently a waiting list for residential city lofts in Kingsport and the majority of the retail spaces are occupied, do a general google search on Kingsport TN for more info on the cities economy and dynamics.
My clients are wanting this to be a LEED project to include but not limited to roof top patios for the residents, solar power (with electric back up), tank less water heaters and more. This is a "green" project.
Funds needed are $710k to complete the project and pay off the current first of $221k.
If the National Trust comes in with the $320k, there is a need for $390k in bridge or construction financing. Fair terms that they are looking for are 8% interest, and 2 points for a term of 9 to 12 months to a first lien holder. The time frame could be less if project goes even close to as planned.
This will be drawn up and facilitated by a reputable lawyer, it will be recorded in the court house. If you prefer, the funds will never touch my clients hands and can be dispersed by a third party that is agreed upon by all. They are not looking for a partner, just a financier. No scammers or weird "creative" deal making schemes please, this is an honest invitation for a real investment. Where else can you make 8% on your money?
The project at this point is at the stage of: ready to pull the permits and start work. G.C. has drawn up a contract and the subs are ready to start.
If you are a serious, honest investor and interested in finding out more information about this project, including pictures or more details, please feel free to send me a private message.
Thank you,
Mary-Beth Morgan

Your terms aren't very attractive. 8% and 2 points is quite low for RE funding.

I've not tried to fund any deal like this, but those terms sound about what you might get from a bank for a commercial deal.

You also say 14% and 4 points doesn't work. Yet, for the loan amount you mention, $390K, the difference is 6% and 2 points. If its held for a full year, that's $31,200. Is this deal so tight that $31K is a killer?

Its also a little worrisome the local lenders, who are right there and know the situation, won't fund the deal.

Thanks for the replies. The reason the local banks won't fund this is because the owners are not local to the project. It has gone through a partial UW process and all is strong except the fact that they aren't local. I am switching gears a bit and going to partner with them so this hopefully is a done deal with the local banks at even better terms than originally looking for.
Thought I would update on the progress of this deal. Again, thanks for the replies.