$1.7 Million In Value Created In 12 Months On This One Commercial Deal.
We've been in the process of refinancing this property for a month…We’ve been on pins and needles waiting for the appraisal to come in
We just got word yesterday. But before that let me give you some background…We closed on this property in November 2021 after trying to negotiate with the owner for almost two years!It was ineligible for bank financing because 95% of the tenants (mostly office tenants) we’re month to month. But most of them were long term tenants, like ones that had been there for decades. We were confident we could get most of them on leases.
The seller made us do something really weird during the purchase and sale negotiation. They made us sign an addendum to the contract stating that we would give all month to month tenants a bare minimum 4 months to stay at the property. We were like why? You know we want to keep them all and get them on leases? (They also forbade us from having any contact with any tenants or visiting the building without supervision)
Unbeknownst to us, something shady was going on…
So we got the property under contract. We had to raise $1.5 million in two weeks to acquire it.I melted the phone lines calling all of our investment partners who had funded our deals in the past…
Nearly all of them said “this is too risky” or said that we were over paying for the property by 2x. Fear and doubt set in. Maybe we were over our skis on this one…
(Not to mention, owning this historic skyscraper was a childhood dream of mine? I started to think “am I attracted to this deal because of some stupid childhood fantasy?”)On my last call, I got one of our investors who was interested in lending the whole $1.5M but he wanted 19% equity in the building.
We made a deal! Fast forward to closing day. We were euphoric
The day after closing we went to the property to get keys…What we saw horrified us
The hallways were packed with boxes. Most of the tenants were getting packed up and moving out!I asked them, where are you going? All of them said “oh the prior owner said you were booting all the tenants out and turning the building into condos. We are moving across the street!” (to a building the prior owners still owned!!!)W T FI was shocked and incensed. How could people in such a small town be so treacherous? I spent the next few days feeling angry and sorry for myself. Well I had no choice. I wiped away my bitter tears.
I decided to put my anger to productive use.
I‘M going to get this thing leased up and stabilized if it f-ing kills me. I spent the next several months working my *** off to make that happen.
The first few months were scary as hell. The property was burning through cash like no one’s business. We had to play the cash flow game.
Our team worked like hell for an entire year towards the goal of getting this thing bankable so we could refinance it and take our private money lender out.
And one year later we got a bank interested in refinancing it.
Just yesterday, our banker called me about the appraisal. I was scared…The appraisal came back at $3.2 million. I couldn’t believe it…We created $1.7 million dollars in value in 12 months!!!We aren’t over the finish line yet but it’s great news nonetheless.
The bottom line is this… Go Big!
