Writing down Principal
I have two investors who started a development right before the bubble popped.
Rather than cutting their losses they decided to double down and finish the development.
They are now upside down big time. Been slogging away for 3 years and have only sold 4 lots...
I believe the total debt is about 2.2mil. The true value is probably half that.
Both the partners are veteran land developers, but the interest payments are taking a toll financially... We could literally mark down to cost and the lots still wouldn't move. Cost is about 10K per acre. They would move for 5-6 per acre. Big lots 3-12 acres.
How does one go about requesting a loan write down?
What variables are the banks looking at when deciding to write down or not? IE... Ability to repay, ability to liquidate, etc.
The bank knows this particular property is causing a serious hardship and could eventually lead to a full out default. At which point the bank would be responsible for selling lots and maintaining a subdivision.
This isn't something anyone wants to do, but its time to start looking at all options.