Need lending advice----Commercial Deal

[Grace Simpson]

Hi fellow investors: I have not done commercial but was approached by a borrower with the following deal-- I need some advice, any comments or experience is welcome, thanks!

Borrower's back ground: a flipper that has been in construction for years, and is familiar with local market

Project: A brand new gas station in a main transportation town of the state. The largest local grocery store has attempted three times to lease option the land from seller but deal fell through because of the main and only hiccup--failure to do required environmental testing (soil and water) , and have dep of eco issue a letter of no further action.

Seller is desperate to sell, they started the testing process about a year ago (dep of eco requires about 12-18 months of testing period) Borrower needed 250 K to paid the seller's lender off, then do a OWR promissory note for 250K with the seller. Borrower's construction company need 500K for building costs. construction takes about 4-6 months. Exist plan is to sell or up from lease to the grocery store for 2-3 million. (previously under contract with the store, yet due to contingency clause re dep of eco, deal failed)

Here is my response to borrower:

will take equity position on this deal if:

Get updated verification from Dep of Eco that they are 1) satisfied with current testing method and will acknowledge and accept the reports and 2) will for sure issue the letter of no further action after the testing is done in a couple months.

Need Bids from construction company to verify the building costs. Verify feasibility of building permit and other related permits

Regarding the seller, we are leaning toward just paying him off instead of a promissory note of 250K, because that will put us in the 2nd position. Either that or we were going to pitch the borrower the idea to take to the seller to consider the 250k to the seller's lender as the down payment, have him carry the contract for 250k but no deed of trust, that way we would still have first position and he would have the promissory note for 250k (don't know if this is feasible). Also, need to verify that he is NOT in default status. is there a better alternative for me as the lender?

Regarding collateral and cash reserve, does 750K seem resonable?

that's all I can think off....anything else that I need to be aware of? Thanks a lot!