Suggestions on selling commercial mortgage note

4 Replies

I sold and owner financed a convenience store in September 2012 for 10 years (Business and Real Estate) and I am interested in selling the note. How should I approach this, and how do I determine an asking amount vs remaining principal and interest?

John,

I can help you figure a market value for your note.  I don't know if this note is something I would buy since I prefer to stay closer to home but I could put a pretty good estimated value on your note.

You can post the information online for all note investors to see and comment on or send the information in a private message to me if there is something you don't want to post online. 

The value will depend heavily on the amount of equity the buyer has in the real estate, the buyer’s credit and timeliness of payments. Buyer's ability to manage the store, store location (demographics, access, traffic counts etc), store upkeep, clean environmental reports also play big roles.

Unless you have a strong note in all three areas, you will likely not be able to sell more than 3 or 4 years worth of payments at a time.

Scott

I am not sure I agree with investors looking to purchase partials on commercial paper.  

There is a little surge in convenience store as collateral but that seems to be more geared toward the property owners exiting into a larger investor like a REIT who then has a model to deploy.  

There might be some plausibility in talking to some of your local and regional banks about bidding on the note.  The key for you will be setting up the bid package prior to getting in front of your potential counter-party.  Hopefully your borrower is cooperative and you can obtain the last couple years financial statements from him and hopefully he is maintaining some decent cash flow still.  Even more hopefully is that those demands are within the scope of your documents as well.  

Within that same idea is going to be the features of the security instrument and note.  Equity and current balance along with interest will play into the bigger picture.  I am guessing since this was private you did not float the rate so there might be an inevitable haircut to mind for extension risk.  If you managed to file both a mortgage and a UCC over the FF&E you will be in a decent position with collateral.  If you only filed a mortgage, then your position will be a little weaker since all you really collateralized is the real property and not much of the business assets.  

Trading commercial paper is not as simple as residential paper as the collateral is much more complex and the legalities of paper are weighted heavily.  If you want to post some general details we might be able to give some additional direction to help you prepare for the marketing of the asset.  I certainly do not think we would be able to drill into any type of relative bid feedback through that type of information exchange, there are just way too many factors that need to be reviewed.

Hey Dion, Thanks for the reply. I filed a mortgage and deed, but not a UCC. I will message you specifics of the deal.

Thanks, John

Hi I can help you .