Exit Strategy Ideas For Multifamily Modification

[Brian S.]

Could someone help me kick around some ideas for exit strategy development? After talking to our lender about a loan mod they've requested that we submit a package covering what's going on, how we want the loan to be modified, and our proposed exit strategy.

General info:
- 30 some unit mfd in a somewhat major metro acquired in the mid 2000's
- Around $2.5mm remaining balance of debt, 10yr ~5.5% balloon which comes due in a few years with a ~$2.2M balloon payment
- Has performed around breakeven on a before tax cash flow basis overall, the last two years have been a little negative.
- In decent physical condition, we renovated half the building after purchase
- Near full occupancy
- It was set up to cater to local college students (2 schools in walking distance that don't provide housing), pre-recession it was near full student tenants but it fell off a cliff and is now ~1/2 students.
- We expect the student population to rebound in the coming years, the schools have launched plans that include large increases in enrollment. Independent and state projection studies see 300-400 additional students per year through 2020.
- Recently appraised ~$2.1M

I've got the numbers figured out on how to optimize returns both before and after tax based on the structure of the mortgage, but in doing so it assumes we'll be able to sell the property. One of the mod features will be a term extension pushing the balloon back 8-10 years from now

Exit strategy ideas I've been thinking through:
- Rent then sell prior to balloon
*have modified so balloon is around $2.0-2.1M
* general upkeep of common areas done -> school enrollment higher -> more student tenants again -> rent raises over time -> increased value to sell for

- Refinance prior to balloon
this also assumes an increase in value (which from market research and lots of knowledge about the building i believe will actually happen)

Any thoughts? don't know how strong it is to present these options to them (director of portfolio management) with both exit strategies assuming an increase in value