POL Loan in Default - Atlanta Luxury Property Rehab

33 Replies

I am trying something new by starting a thread on a single Patch of Land loan for discussion and information sharing between investors.  This thread is to be focused on "Atlanta Luxury Property Rehab" in Atlanta, Georgia.  Let's keep this thread focused on this property.  If you like this concept, please start new threads on other properties.

The property is currently REO and POL is pursuing a sale.

I just received this update from Zillow:

This home has an open house scheduled on Sun., Oct. 22 from 3-5pm.
For Sale  
$3,400,000
8 bd, 9.0 ba, 20,551 sqft 3206 Arden Rd NW, Atlanta, GA

Is it just me, or is having an Open House kinda crazy.  If I am looking for a $3.4M home, I would guess that I would expect a personalized tour at my convenience.  But if there is no way I can a afford a $3.4M home, I would love to come tromp through one to see how the other half lives.  Even worse, if I am a thief operating in the area, I would love to come scope it out.

The Zillow link is:  https://www.zillow.com/homedetails/3206-Arden-Rd-N...

Open houses are usually realtors looking for leads - people in search of a house. However, there is the odd sale - even a blind squirrel finds an acorn now and then

This property has been poorly managed and represented by POL since day 1. Just look at the expected ARV back in 2015 - 6.5MM! Even after the property foreclosed, it took POL 5 months to get it listed. Listing had dull pictures and a crazy asking price of 3.8MM. After 4 months, someone finally got a clue and staged the property and took decent photos with a more reasonable asking price. This all should have been done initially within 2 months of the foreclosure.

There is a good chance investors will not receive their full expected interest payments when everything is said and done.  There is even a possibility that some principal will be lost when this investment goes full cycle.  There are a load of fees that have accrued during the past 2 years that POL will take off the top.

I don't mind the open houses since this generates buzz and hopefully some leads to sell the property.  It costs the investors nothing and basically gets the selling agent to do some work for his decent size commission when the property closes.

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I have likewise been very disturbed at the way POL has managed this property.   Fix-and-flip real estate is an entirely different business from RE lending, and POL clearly isn't very skilled at either. 

At this point I wish they would just cut the price and make a quick sale, even if at a loss.  I am tired of having my money tied up in such a poor investment, I would rather cut my losses and be out.  Even the revised listing screams "desperate" - it mentions it is "staged" and "all offers encouraged" in the first two lines.  From what I know, there have been no offers in six months.  Do something, POL...

For the Atlanta Luxury Property Rehab - Tranche III investment:

While the underlying loan remains outstanding, the following are some key updates that have occurred in the last 30 days. Our Real Estate Agent hosted an open house last month. We received two offers of $2.3MM and $2.6MM, respectively. We countered both offers @ $3.1MM, which was the amount needed to recoup principal, default interest, late fees, contract interest, foreclosure costs, and fees. Our counter offers were not accepted. We are currently reviewing the listing strategy with our Real Estate agent for a possible price adjustment and change in marketing. As developments occur, we will keep you informed. If you have any questions about this investment offering or update, please contact Investor Relations by replying to this message.

@Dan Rudolph   that's probably your end value then 2.3  to 2.6

and staging a home of that size is quite appropriate.. we stage most of our new construction homes. and higher end flips.

one thing you will learn in markets that are NOT  SF  Seattle  NY  north Chicago.. is that big mansions sell for a fraction of what you think they are worth based on comps and sq ft comps..  I have seen this over the years many many times especially Atlanta area.. there is a sweet spot in that city at 1.3 or so and under.. you go over 2 mil and if falls off a cliff 4 to 5 million very tough... 

think about how many homes in Oregon sell for north of 4 million.. its probably fewer than 4 or 5 a year.. unless they have substantial acreages with them as in ranch's etc.

no dog in the hunt of course.. but you guys should take the mid 2 offers if they are real close and move on. if it gets all your principal back or at least 90s of it that Is better outcome than most HML deals that go bad and go all the way to OREO status.

Well, POL needs to understand that “the total of principle, fees, interest, foreclosure costs, etc, etc.” has No bearing as to what the property is worth. As @Jay Hinrichs pointed out, they need to take their best offer and run....”reevaluating and adjusting marketing strategy” is just ignorant and refusing to face reality at this point.

POL, are you listening???

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I think we are right around the number where investors will get only their principal back.  Anything less and investors will start losing principal.

I have been to all 3 of the open houses, and here is my thoughts (in no particular order):

  • The top floor is very "maze-like". Some reconfiguring of the layout would be beneficial.
  • The entire bottom floor has wall to wall travertine. Some people like it, so think it is dated. Upstairs is mostly wooden floors. There is a good number of plywood patches here and there.
  • There are a good number of missing ceiling lights and such. Not a big/expensive deal, just the number of them makes this a sizeable undertaking.
  • Noticed a lot of paint/fit/finish issues. I would figure another coat of interior paint in all the rooms. Just the amount of sq/ft will make this an undertaking. I would figure buying a pallet of calk for the all the other issues (only a slight exaggeration)
  • The house does have a whole house intercom, but ti is very dated. I would upgrade or remove it. If it where me, I would go more of the smart home route, which given the size is going to be an undertaking
  • The front exterior entrance is not very impressive, given the neighborhood standards. I would replace it with something that is much more visually "substantial"
  • Along those lines, the front yard needs a lot of help. People buy these houses for "bragging rights", and an impressive front yard is how they show off to everyone driving by. You can probably get by with cutting a few corners inside, because no one really ever sees inside. I would spend a very large portion of the budget on the outside of the property.
  •  I would also redo the driveway entrance. This part of the neighborhood is not know for big privacy fences and gates, but something nice and "relatively understated" will go a long way.
  • I would not worry about a fence in the back. If you want one, I would not spend a lot of money on it. 
  • The back yard needs a pool, and landscaping. And by a pool, I mean a big one with a large patio where you can put lots of pool chairs for sunning. Maybe a cabana or 5.
  • There is a guest/pool house. It is in complete disrepair. It is missing floors, like you can see the ground underneath. It is also very small. I would expand it. Maybe easier to just tear it down and start over.
  • The A/C units need service. There are many units.
  • It looks like the A/C drain lines have leaked on some of the units. May need to address.
  • In the attic, the insulation seems to be discolored. Not sure if dirt/soot/mold/other. 

As for who will buy this:

  • This is a sq/ft play. While there are many homes in the same price range, none of them come close to the number of sq/ft. So, you need to cater to someone that needs the space.
  • Few ideas: 
    • The next playboy that has a lot of sleepover guests.
    • Event space. Photo studio, or cater to the growing movie industry
    • This would make a great youtube studio. Turn each bedroom into a set/studio. Have many differ YouTube channels in the same place. 
    • Or any other home based business, with multiple employees.

I just got a 360 camera for Christmas, so I did make a video of me walking through. Actually, this is my first 360 video I have ever made. It is now on YouTube.

 Video walk through

The struggle continues.  Any guesses on why the listing would have been removed?

DATEEVENTPRICE$/SQFTSOURCE
03/09/18Listing removed$3,100,000$150Atlanta Fine H...
03/05/18Back on market$3,100,000$150Atlanta Fine H...
02/06/18Pending sale$3,100,000$150Atlanta Fine H...
01/05/18Price change$3,100,000-8.8%$150Atlanta Fine H...
10/09/17Price change$3,400,000-2.9%$165Atlanta Fine H...
08/08/17Price change$3,500,000-5.1%$170Atlanta Fine H...
07/06/17Price change$3,690,000-2.9%$179Atlanta Fine H...
06/01/17Listed for sale$3,800,000+32.3%$184Atlanta Fine H...

Getting repairs done that were uncovered during the last buyer inspection.

@Dan Rudolph , How much was the original PoL raise, how long a term and what was the expected yield?

@Steve Powers , in January, 2016, it was presented as 12% APR, 48% ARV, 12 months.

"An independent third party appraisal commissioned by Patch of Land, shows an After Repair Value (ARV) of $6,500,000 for 3206 Arden Rd. The ARV ratio is 40% and is in line with the data we found during our due diligence process. Our research shows the residential market surrounding the underlying property in this area of Atlanta is stable and supply outweighs demand."

The incompetence/negligence of POL on this and other projects that I am stuck in borders on criminal.

Latest update from POL:

Rough weather caused a slight delay in the completion to the repairs to the property. The carriage house has been removed and the water below the home has been drained. We are waiting for the contractor to complete the installation of the french drain around the structure. We plan to have the property back on the market by the end of the month with a new list price and updated exterior photos.

I looked up the property tax records on this property and penalties and interest are being assessed.  It looks like POL forgot to pay the bill!?

Eric C., do you have a link to that? 

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