When you make your deal as much as I do, you see some crap. Today I thought it would be fun to share one of those deals with you.
First, there is a little background.
There used to be a savings and loan association or a lending institution commonly known as S & L. These savings and loan associations were a great source of mortgages before the 1990s. However, in the early 1980s, interest rates soared to double digits, causing problems as they were not ready to respond to the surge.
Many S & Ls went bankrupt. As a solution, deregulation has allowed these institutions to invest in higher-risk real estate assets to enhance returns. Good in theory, but bad in practice.
Groups such as Far West Savings, American Savings & Loan, and Cal-Fed have become a source of funding for commercial real estate investors and developers. Sure, many great projects have happened, but there have also been many shipwrecks. We were in the business of marketing one such wreck.
A Tennessee group has acquired a portfolio of bad assets in California from American Savings & Loan. Most were mortgage homes, but one was a multi-tenant industrial park. Understand: Most bulk purchases included dozens of buildings across many cities. This is similar to the “Forrest Gump” line. “I don’t know what to get, like a box of chocolates.”
Limited due diligence occurred before closing. How can you do that? The seller (S & L) needed cash, had a large amount of loans on the books, and transaction speed was paramount. As a result, people who bought discounted prices to offset the risk pinched their noses and jumped into the abyss.
At the same time, in mid-1986, we realized the problem. New in my career, I made a lot of door-to-door visits looking for someone who needed to move.
In one particular project in North Orange County, vacancies were rampant, weeds were higher than Fesk, and there were two scrapped cars in front of one of the units. Danger, Will Rogers! Our instinct was right — the deal was in progress. I needed to identify the owner of the project.
You can now access title owner information on your mobile device. In 1986, I called First American, Ticor, or Chicago or searched for a microfiche bank. This is the same as checking the city’s architectural plan. Yes, the city hasn’t made much progress since the mid-1980s, but I deviate.
As mentioned earlier, we have connected with buyers from Tennessee. Good news! A gentleman was placed in SoCal to manage the sale of all homes and the like. Great guys and we hit it.
With the newly signed agency agreement, we have begun marketing a building for sale. Selling lists in the 80’s includes creating pamphlets (no desktop publishing), setting up a sign-out front (not allowed to fool the few remaining residents), contacting neighbors (easy), which It consisted of knowing if the investor had purchased. Similar offerings (reviews of hardcopy compsheets), and discussions with other brokers.
As a reminder, there weren’t multiple listing services at the time, so the available properties were paging and MAILED to the brokerage firm. Snail email, oh horror!
Buyers were quickly identified through brokers, purchase terms were negotiated, and a boom and escrow were underway.
As an aside, this was October 1986. A major change in tax law occurred on January 1, 1987. The date could not exceed December 31st.
it’s simple. There were 3 months. Things go as usual, …
The buyer called me in mid-December. I was planning to close the store in a week, so I wanted to discuss the details. error! I will never forget his words. “Allen, I’m involved in the project. There’s a huge sinkhole in front of the rear structure, which is getting bigger and bigger!”
At first I thought it was a joke. There is no such luck. Twenty minutes later, I witnessed the scene from the movie “Great Earthquake”. You could have buried Volkswagen in the hole!
We discovered for two days that the leak was the cause and the city was responsible and had to repair the deluge. Huh. But wait, it was December 22nd. There is also what is called the holiday season. Getting someone to respond quickly at this time of the year is the same as moving an elephant with a pallet jack.
The rest of 1986 is slowly moving away, and we are intimately dependent on urban workers. We relied on unconventional tactics. Several In-N-Out lunches for the crew, Miller Light’s case (which was overtime), and many prayers ended successfully on December 30th.
Our client was very excited about our performance and attended my 30th birthday party 11 days later. Yeah, that’s another story.
SIOR’s Allen C. Buchanan is a principal of Orange Lee & Associates Commercial Real Estate Services.He can reach at firstname.lastname@example.org Or 714.564.7104.
A crazy deal took moving mountains while filling a sinkhole – Press Telegram Source link A crazy deal took moving mountains while filling a sinkhole – Press Telegram