INSIDE THE DEAL: Buyer Sidesteps Tougher Terms from Bank
- Mar 03, 2009
By Keat Foong, Executive EditorValley Glen, Calif.—What do you do when your bank comes back to you with modified terms just as you are about to close? The $5.2 million purchase of 6125 Fulton Apartments demonstrates the financing complications that can arise in today’s markets, and how, despite all, the sale can still be concluded. The purchase contract was signed in the fall during the midst of the September/October 2008 financial crisis. The buyer, Franklin Management, was a strong long-time client of the lender, a bank with which it had more than 10 loans, says Rick Raymundo, vice president of investments in the Downtown Los Angeles office of of Marcus & Millichap Real Estate Investment Services. However, the bank was bought over by another entity, and it decreased the LTV from 70 to 60 percent just a few weeks from closing. “The buyer had to come up with $500,000,” says Raymundo, who represented the buyer. The buyer did not want to cough up the additional cash.The seller agreed to provide a one-and-a-half-month extension to the Dec. 11 contract, and Franklin Management was able to find another bank to provide it with 70 percent financing in that time. The deal closed at the end of January. “A cooperative seller who is realistic with the price; that is what we need in today’s market,” says Raymundo. Raymundo, who is also a director of Marcus & Millichap’s National Multi Housing Group, represented the buyer. Chris Malcolm of Coldwell Banker represented the seller. Raymundo says the transaction was “not a steal, but well priced.” He says the property is in a dense rental pocket and close to another, 40-unit, property he had found for Franklin Management to purchase a few years ago. 6125 Fulton was not a full-blown listing and was held by a boutique firm, and the buyer is purchasing the property for a 1031 exchange, Raymundo indicated.Amenities include a fitness center, clubhouse, on-site laundry facility and a swimming pool.