Dan and I are at it again.  Reaching for something that seems impossible.  We are going to try to purchase the building that Victory resides in – 4863 Shawline St – for $ 25 million and no money down.

Quick backstory. We’ve been looking for a building for some time that we could permanently house Victory Gymnastics in.  Being in Kearny Mesa, choices are generally slim given our needs and requirements (+10k sq/ft with +18 ft ceiling heights). Our broker made the off-hand remark that we could put an offer in at our current place.  I said why not. And would you believe it the owner is willing to entertain an unsolicited offer.  Normally large buildings go on sale for specific reasons at specific times.  The reason for a sale is often important to know and can give you leverage during price negotiations.  In this case, it just so happens that the family that owns the property is looking to liquidate all their assets in the next 5 years and move into philanthropy – perfect!

The general plan is to find an equity partner that can put up the capital for a down payment on a standard mortgage.  That’s a lot more complicated than it seems.  First SBA vs Standard Mortgage, we have to go standard because SBA requires 51% occupancy within 1 year of purchase.  Since the building is too large, that’s not possible for us. That means instead of 90% loan to value (10% down) with an SBA loan we’ll more likely have to be at 80% or even 75% LTV. Basically, we need to find about $5 million in cash/capital.  Second and probably most importantly, anyone willing to give us that kind of money could and probably would just buy the property themselves.  Our pitch here being we are bringing the deal to the table, we are a tenant in the building contributing to the principle and profits, and we can manage the property. It’s not the strongest pitch… but it’s all we got right now.

In the last week, we’ve activated our network.  Our broker started negotiating with owner, developing a valuation model to justify cost to bank and partners, and passed us historical rent rolls and community comparables.  Our CPA began looking for high net worth individuals we could possibly partner with.  We reached out to our contact at Wells Fargo where we got our 504 loan to start the financing process.  And lastly and most importantly, we set up some meetings with some mentors in this space.

We immediately got some interesting leads from our mentors.  It was suggested that we look at the EB5 program and a 100% financing package.  There was also talk of a L1 Visa. We explored REITs and Capital Firms.  I’ve made an impressive number of phone calls and google searches in the last week on all these subjects.  Currently, our best leads look to be traditional high net worth investors looking for Tax Equity deals.  Quick side note – I don’t know this stuff, I was never taught this stuff.  These are programs, ideas, and options presented by smarter people then myself that we actively try to surround ourselves with.

Here’s the lesson and the lesson I’m writing about to reinforce my thoughts and efforts on the exact same subject.  You need people.  You need smart people.  You need people that are better than yourself.  And you need people that believe in you – though it is business so you can’t count on this always.  Find these people, cultivate these relationships.

It’s been a hell of a week.  I’m simultaneously beaten and emboldened. Stay tuned.

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