Refinance problems for thriving Portland event center

[Dennis Adams]

Business is starting to boom at Alberta Abbey in NE Portland.  We're signing long-term agreements with established performing arts groups.  Our renovations recently concluded with the completion of our new bridal suite.  Our full-time tenants in the building are enthusiastic to be part of a vision that has become reality...

But our efforts to refinance have come up empty.  We've gotten close with lenders of all types, but our unique business model and short operating history have always derailed us in the end.  We are on our second extension with the current note holder and they just want their money.

There's no more time to begin yet another long loan process.  We fear any hint of foreclosure or bankruptcy, believing that either one would destroy our bookings and reputation.  It's frustrating because we have never missed a payment, have about $1.7M in asset value, have about $7k per month in free cash flow, and everything is on the rise.

I would like to hear from anyone who has advice about how to get out of this tight spot.

[Shane Pearlman]

Hi Dennis.

You have my serious sympathies. I have yet to have a transaction that did not involve drama with a bank. Personally, I'm both blessed and cursed in this sense. But it has lead to a serious creative streak at the 0 hour. I'll run you through a few things I came up with in the last 5 years, which might or might not apply.

We are missing a little info which might help. Note / loan size, terms you are looking for, a little more about the property, more about the ownership structure (personal, business...)

#1. Portfolio loans / Lending on a larger property cluster.

Do you have another property / assets you can leverage?

We had a duplex which we desperately wanted to refi, but due to the tanking economy (thank you 2008), we got a lender, locked, got buy off / appraisal passed muster by the hair of my chinny chin chin. They had a backlog, took two months, then asked for another appraisal. Sadly, the second time it didn't pencil. #shafted. The difference between our 6.7% loan and the 3.625% loan locked was nearly 2k per month cashflow. We tried another lender. Failed again. After going through 9 different banks, I started pitching a different idea. We had enough equity & cashflow in our entire portfolio to pencil, maybe someone would refi all our properties at once and allow us to move equity around to qualify. It took a lot of phone calls, but I found someone who was able to get that deal done (he does loans in portland and if you message me, I'll get you an intro). We refinanced two duplexes and 2 homes, I ended up having to put 80k of our personal savings into the deal, which wasn't terribly exciting, but when I considered an annual guaranteed return of 30% cash on cash, that seemed like the best place to use the funds.

I don't have much experience in person with local banks, but I have seen people work miracles through relationships with bankers. I know you are out of time, so this is why I am not harping on that.

#2. Partners & Self Directed IRAs

There are people with IRAs and lots of liquidity who might be stoked for a solid, stable and reasonable return.

We had removed all contingencies on a property in 2011 and were days from closing. My primary investor stopped picking up his phone. I was a mess. I had personal put in 25k in earnest money and hadn't been able to get a hold of him in a week. My wife and I wouldn't be able to close alone. I realized I could either find someone with 100k cash to invest in 3 days or loose my earnest money. I started hunting. I ultimately found a family member who had retirement funds, and for the right level of risk exposure was interested in the deal. Originally we were simply looking for a couple year loan, but they decided they wanted to partner after seeing the details. They were very risk adverse. My wife and I had to personally guarantee the cashflow performa (very low risk), assume all cash calls (medium low risk) and they got to be in first position for any recoup when the property sold (low risk as I was buying cheap and forcing equity). 

There is also the possibility of a passive business partner as opposed to a note. My wife and I have angel / silent partnered in 3 companies which I believe in and contribute to our community.

#3. Business LOC / Loan

Any chance you can buy this asset through the business rather than personally? There is a chance that a business banker might see it differently than a real estate banker.

You may not have the business history, but does someone in your network? Is there a possible partnership with another company / venue / event promoter who can show a longer track record to remove that obstacle?

#4. Government / Non Profits

From your website, you look like something that could give a funded redevelopment agency of happy hardon. You are revitalizing, offering space for social contribution, commerce and community development. I'm curious if there are SBA loans or grants available to a space like yours.

Good luck @Dennis Adams and let us know how it shapes up.