Silverleaf Financial Acquires $17.7 Non-Performing Loan

Salt Lake City–Private equity firm Silverleaf Financial last week announced it had acquired a $17.7 million non-performing loan. The loan is secured by a downtown Salt Lake City residential condominium and retail development, of which the partially completed Broadway Park Lofts is the primary component.

“We bought the loan at a heavy discount,“ Salt Lake City-based Silverleaf Financial Chief Executive Officer Shane Baldwin, tell MHN. “We will either cut a deal with the borrower, or if the borrower is so upside down he can’t do anything, we’ll take the property and sell it for whatever we can sell it for.”

The $17.7 million loan was acquired for less than $10 million, Baldwin adds. “The loan came due, [the borrower] couldn’t refinance it, it went into default, and U.S. Bank decided to sell the loan to Silverleaf Financial.”

When complete, the Broadway Park Lofts is to include a total of 86 condominiums ranging in size from 550 to 1,134 square feet. So far, 34 units have been completed and are move-in ready.  The remaining condos, as well as 9,490 square feet of commercial retail space, are in grey-shell condition.

The loan default “wasn’t a function of the market,” Baldwin says. “There certainly is a market for this product type.  The original developer was looking to get too much.”  The developer was initially asking prices in the $400-per-square-foot range, at a time when downtown Salt Lake City condominium units were selling for prices in the $300-per-square-foot range, he reports.

Later, the developer did find buyers in the $240-per-square-foot range, but U.S. Bank balked at prices that low.  Enter Silverleaf, who agreed to offer partial releases on the 34 completed condos, securing about $5 million in total gross proceeds, Baldwin says.

“The biggest competitive advantage of Broadway Park Lofts is a more affordable selling price,” he says. “Because we were able to acquire the loan at a heavy discount, we are able to sell these condos at lower prices than other condos.  There’s a distinct market segment interested in a more affordable product type.”

The Broadway Park Lofts’ location is another advantage, he adds, noting more than $1 billion has been invested in the downtown Salt Lake City market by the Church of Jesus Christ of Latter Day Saints. The real estate market is improving in the city, where substantial revitalization efforts are underway.

“Salt Lake City is one of the few markets in the country at this time that’s continued to develop,” Baldwin says.

Was there anything significant about the timing? “It was a quarter-end push by U.S. Bank in trying to sell,” Baldwin says. “They wanted it off their books by the end of the year.”

The number of buyers who have lined up thus far for the 34 completed units at $240 per square foot indicates there are likely motivated buyers for the remaining 52 units. “We’d like to get more, but even if we don’t, the deal if very profitable for us,” Baldwin says.