ACQUISITION & COMPLETION OF DISTRESSED ASSET
Acquisition of a GFC-era distressed commercial-retail property development via mortgagee sale, project was approximately 90% completed.
The bank appointed a Receiver to liquidate and recover bank’s funds - our clients recognized an exceptional acquisition opportunity…
The Problem
A small business family had successfully negotiated to acquire the distressed asset from the Receiver but could not raise the required funding: their equity was limited, financial information not up-to-date, the property was incomplete (no rental income to support loan servicing).
They tried for 6 months; the best finance offer they got was from a private lender at 50% LVR of “as is” Purchase Price with pre-paid interest for the 1 year term at high interest rate & fees.
The LINK Solution
LINK formulated a finance solution, detailed the strategy in a commercial credit paper which was tendered to a reputable tier-2 Non Bank Financial Institution (NBFI).
Gaining the support of the NBFI’s Credit Committee, LINK successfully concluded negotiations on behalf of its clients.
The End Result
A commercial investment finance facility was settled based on a VP “as if complete” valuation; this provided the full contracted purchase price at 70% LVR on a ‘stand-alone’ security basis.
A 3-year fixed interest rate was set to manage interest rate risk. A 12 month interest reserve was allocated to allow completion and letting-up of the security property.
Over the years, subsequent revaluations on loan roll-overs revealed a tripling of the original purchase price while the loan remained constant, providing substantial wealth growth.
The commercial-retail investment property is fully let, it is now the family’s main asset, main source of equity, and main source of regular & recurring income.
Outline
Loan Amount
$4,130,00
Lender
High quality, Tier-2 NBFI
Lender Exposure
70% LVR ("as if completed" Vacancy in Possession basis)
Loan Term
3 Years
Interest Rate
5.15% pa, fixed for 3 years
Lender Estab. Fee
0.75% of loan amount
Exit Strategy
Loan Roll-Over or Refinance or sell for a profit
