Seeking $250k Bridge Loan, 1st Pos 29% LTV, Will Payback Double

[Chris Newman]

I own an aggregation of 50 legal lots, totaling 14 acres, one convenient minute from downtown Everett, WA, just north of Seattle. I purchased it in 2010 and live here. This is a unique piece of periurban open space land in a busy high-profile regional gateway location.

I’m currently marketing the land as the best site in the Pacific NW for a tourist farm brewery, brewpub and working hops farm, which it is, for just its small-lot breakup value of $853k and am getting regular inquiries. If it was located one minute west, you couldn’t touch this much commercial land, the only other permitting for a brewpub, for $10 million. But, while this site is in the heart of about 200 local microbreweries, this use is obviously a small buyer demographic.

There is no subdivision necessary to sell off individual lots - that’s already been done. But, I’d rather sell it in one piece. A breakup is a last resort. Here's a scan of the county plat map:

This land also contains certifiable Transfer of Development Rights worth considerably over $1 million. But, I need to get these credits certified and clipped off before selling the land. It has to be done in this order or the credits cannot be certified and salable.

But, I’m in a time bind, which is why I need a bridge loan:

1. My seller's DOT balloons in just about a month and if I don't get it replaced ASAP, I stand to lose a LOT.

2. Before I can get these TDR credits certified and sold, I need to do boundary line erasures on some of the smaller lots to boost the credit count, which will probably take at least several weeks. Then, I need to go through the county TDR credit certification process, which takes another 30 days or so. After that, they're salable. 

My bind is that it will take longer to end up with certified and salable TDR credits than I have time to get them to that stage. I’m not going to count on a land sale, but will also keep that marketing going. I want to sell the land, no matter what.

A bridge loan of $250k will cover everything that I need and get me to the point of being able to sell TDR credits. This new free market is expected to open on October 21 and I’m working hard to line up pre-sales with multifamily developers. Once certified, these credits will be registered and recorded legal real estate documents that are the only way for developers to obtain 160% high-density upzoning in the county’s urban growth area.

The $250k will be secured by a 1st position DOT, collateralized by both the land's value and the value of the TDR credits. The LTV on just the land value alone is 29%. In exchange, I'm willing to pay back a flat $500k within 18 months.

This will all close within bonded escrow and I prefer Chicago Title, which has nationwide offices.

Payback will occur in one of two ways, written into the DOT terms:

1. The first cashflow from TDR credit sales will be earmarked for paying off the DOT in full. This is a flat rate and the full $500k will be paid whether it takes 90 days or 18 months to sell them. I'm expecting that 90 days is a lot closer than 18 months. Since I won't see any cashflow myself until this debt is cleared, I'm seriously motivated.

2. If I sell the land before the credits, it will likely be on seller-contract terms with 1/3 ($281k) down. In that case, the first $250k pays down the bridge DOT, so the lender gets their cash back upon the closing. The other $250k will be paid from the first cashflow from credit sales.

Please PM me for further discussions. Thanks!

Some source documents:

The Snohomish county flyer for the local TDR program: http://snohomishcountywa.gov/DocumentCenter/Home/View/8118 This property will certify out at 38 farmland Sending credits that become 304 urban Receiving credits. There’s been at least one confirmed Receiving credit sale at $10,000 and the large new receiving area rezone is going to need thousands.

The county council hearing notice (Ordinance 15-016) for the final passage of the new area-wide high-density rezone that mandates the use of TDR credits to receive bonus building permits: http://snohomishcountywa.gov/2134/Council-Hearings-Calendar toward the bottom of the page.

My extensive farm brewery marketing package and property location analysis: https://www.biggerpockets.com/files/user/ChrisNewman/file/600-000-hops-farm-and-brewpub-site-near-seattle-for-sale