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My Dad's corporation is facing a significant foreclosure and I thought I would turn here for any help or resources fellow FWers could offer.

I will start by saying I have limited real estate and commercial experience (yet). My dad has been in the business of flipping and renting properties for decades now but is also fairly new to commercial real estate. He is not as computer savvy as I am and I'm hoping I can dig up some information/lenders he otherwise wouldn't be able to find.

My dad and his business partner jointly own two commercial properties in a downtown/metropolitan area. One is a bar, the other a restaurant. My dad's business partner also runs one of the businesses as his day-to-day job. Anyway, both properties are held under a corporation. The financing for the buildings was apparently a 3 year balloon, which is somewhere on the order $1.5 million, that was due last January. A forbearance was made at that time that my dad seems strangely unfamiliar with, but the short of it is that they agreed to continue to make their payments as well as an additional $1500/mo to sustain the loan. Dad was under the impression this indefinitely delayed loan term and for some reason (lots of other alligators closer to his boat I guess) he had not been seeking a refinance. Well a notice was sent out this November that he just received December 20th... apparently the properties are going to be sold at auction at the beginning of January. That is unless we can find some way to stop them and slow the bleeding/arrange a refinance. Mind you, the bank is calling for payment of this loan even though my dad is in good standing and they make their payments on time every month...

They are currently talking to a bankruptcy lawyer as well. When establishing the corporation both business partners were required to sign a promissory note or something tying their names to the loan. My dad is afraid that this note leaves him personally responsible for any outstanding debt following the sale of the properties and bankruptcy of the corporation. Can this be correct? Is there really such a document that basically just negates the protection offered by the corporation?

What are some options we should be exploring to delay the sale? Both pieces of real estate are very desirable and refinancing doesn't SEEM like it should be a problem... One of the buildings is bringing in several thousand dollars a month in cash flow. My dad has just begun exploring the refinance with a credit union (no idea who/where he found them) but I would like to give him more options of lenders to contact. Can anyone suggest good commercial lenders?

Thanks in advance. I love Fatwallet. Reading and learning from this forum was instrumental in my first home purchase just 5 months ago and I hope some people can offer some help in a very trying time!!

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It sounds like your Dad and his partner signed a personal guarantee on the loan, which the bank probably required if the corporation was new, undercapitalized, etc. If that is the case, then yes, your Dad would be personally liable for the loan.

I don't have any information on commercial lenders, but a refinance seems like the best way to go since it sounds like the properties are valuable/profitable.

It shouldn't take more than a month to do a refi. Get it done quick and pay off the balloon. Also, have your dad talk to the bank and have them point out exactly where they wrote that the forbearance expires. Lots of auction sales/foreclosures are done without proper notification, and this would delay the process.

If it has positive cash flow, it especially shouldn't be a problem to refi.

It shouldn't take more than a month to do a refi. Get it done quick and pay off the balloon. Also, have your dad talk to the bank and have them point out exactly where they wrote that the forbearance expires. Lots of auction sales/foreclosures are done without proper notification, and this would delay the process.

If it has positive cash flow, it especially shouldn't be a problem to refi.

strippers



(sorry OP, couldn't resist)

Is the company profitable?

safelite13 said:   Mind you, the bank is calling for payment of this loan even though my dad is in good standing and they make their payments on time every month...He's not in good standing, he's 12 months late. Just because they've let it slide thusfar, so he'd have time to make alternate financing arrangements, he's not entitled to them continuing to do so - especially since he's make no further effort to resolve the situation.

safelite13 said:   The financing for the buildings was apparently a 3 year balloon, which is somewhere on the order $1.5 million, that was due last January. A forbearance was made at that time that my dad seems strangely unfamiliar with, but the short of it is that they agreed to continue to make their payments as well as an additional $1500/mo to sustain the loan. Dad was under the impression this indefinitely delayed loan term and for some reason (lots of other alligators closer to his boat I guess) he had not been seeking a refinance. Well a notice was sent out this November that he just received December 20th... apparently the properties are going to be sold at auction at the beginning of January. That is unless we can find some way to stop them and slow the bleeding/arrange a refinance. Mind you, the bank is calling for payment of this loan even though my dad is in good standing and they make their payments on time every month...What kind of relationship does your father have with his banker? The original 3 yr note with a balloon is a fairly typical commercial loan, but if the business is sound and the property value sufficient, why would they extend forebearance rather than refinance the loan? Banks make money by making loans. Believe me, they aren't interested in owning your father's commercial real estate. Get him in to the bank to talk about what the bank can do for him. He's in the driver's seat (assuming everything you say about the value of the property is correct).

germanpope said:   strippers



(sorry OP, couldn't resist)



Or at least a bartender with a low-cut blouse. ( )( )

1. Write your story into a screenplay.
2. Time travel to the early 80s before your story was made into 2 dozen movies.
3. Hire Corey Haim.
4. Return to present with profit from 80s movie, and repay loan.
5. Write screenplay about above, sell in 2011.
6. Profit.

Groupon and its competitors.

imsparty said:   Groupon and its competitors.How will this stop the foreclosure sale?

Update, OP? Was the property sold, or were you successfully able to delay it?

imsparty said:   Groupon and its competitors.

Why? So you can give away food & drink at 25% of your menu prices (typically groupons are 50% value of which the company gets 1/2), deal with overwhelmingly large crowds (perhaps resulting in hiring addiitonal staff), and hope and pray that it leads to an increase in long-term repeat business? I have yet to see any stats on "the Groupon effect" and will remain skeptical on the benefits to small business owners until someone shows me some numbers!

dcwilbur said:   What kind of relationship does your father have with his banker? The original 3 yr note with a balloon is a fairly typical commercial loan, but if the business is sound and the property value sufficient, why would they extend forebearance rather than refinance the loan? Banks make money by making loans. Believe me, they aren't interested in owning your father's commercial real estate. Get him in to the bank to talk about what the bank can do for him. He's in the driver's seat (assuming everything you say about the value of the property is correct).

If the value of the property is that high, the bank has a HUGE financial incentive to foreclose, get the property at a fire sale price, then resell it as a REO for a MUCH higher price and keep ALL the profits.

A lot of people dont get how banks MAKE money on some REO's... this is precisely one of those situations.



Commercial lenders are not as stupid as the residential ones. They are sharks and know how to make money, both coming and going.

SUCKISSTAPLES said:   If the value of the property is that high, the bank has a HUGE financial incentive to foreclose, get the property at a fire sale price, then resell it as a REO for a MUCH higher price and keep ALL the profits.

A lot of people dont get how banks MAKE money on some REO's... this is precisely one of those situations.

Commercial lenders are not as stupid as the residential ones. They are sharks and know how to make money, both coming and going.
SIS - A bank making money on foreclosure and liquidation of REO, especially an operating business like this, would be extremely rare, especially when one of the borrowers is the principal in the bar or restaurant.

There could be a number of reasons why the bank is no longer interested in working with this loan - regulatory pressure, capital requirements, change in business focus, etc. - which is why I suggested that the OP's father get in to talk to the banker.

Pure speculation on my part, but with the bank having sunk $1.5 million into this deal already and no indication from the OP that there is significant equity in the property (he says they are desirable but he also says they are trying to "slow the bleeding"), my guess is that the bank just wants the borrowers to go elsewhere.

dcwilbur said:   SUCKISSTAPLES said:   If the value of the property is that high, the bank has a HUGE financial incentive to foreclose, get the property at a fire sale price, then resell it as a REO for a MUCH higher price and keep ALL the profits.

A lot of people dont get how banks MAKE money on some REO's... this is precisely one of those situations.

Commercial lenders are not as stupid as the residential ones. They are sharks and know how to make money, both coming and going.
SIS - A bank making money on foreclosure and liquidation of REO, especially an operating business like this, would be extremely rare, especially when one of the borrowers is the principal in the bar or restaurant.

There could be a number of reasons why the bank is no longer interested in working with this loan - regulatory pressure, capital requirements, change in business focus, etc. - which is why I suggested that the OP's father get in to talk to the banker.

Pure speculation on my part, but with the bank having sunk $1.5 million into this deal already and no indication from the OP that there is significant equity in the property (he says they are desirable but he also says they are trying to "slow the bleeding"), my guess is that the bank just wants the borrowers to go elsewhere.
Perhaps you might be right, but I really doubt it. You are forgetting that banks have as a practice initiated loans they knew were destined to fail over the past few years. It has to do with the fact that the mortgage insurance payout is more profitable than the note - witness AIG. This is only one tier of the multiple levels of mortgage fraud.

some people are very slow. IT WON'T.
So OP's father will sell a few thousand 50% off coupons (pocketing 50% of the revenue from coupon sales).
AND then he will go OOB.

Of course, Groupon rejects most companies for this very reason, BUT their fly by night competitors may not.

now give me red. Glitch99 said:   imsparty said:   Groupon and its competitors.How will this stop the foreclosure sale?

Update, OP? Was the property sold, or were you successfully able to delay it?

Quikboy4 said:   Why? So you can give away food & drink at 25% of your menu prices (typically groupons are 50% value of which the company gets 1/2), deal with overwhelmingly large crowds (perhaps resulting in hiring addiitonal staff), and hope and pray that it leads to an increase in long-term repeat business? I have yet to see any stats on "the Groupon effect" and will remain skeptical on the benefits to small business owners until someone shows me some numbers!
Chicago's Navy Pier blames Groupon ..

Sorry I linked to the HP, but I was too lazy to pull up the link to the original story.

Bottom line, Navy Pier netted less.



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