Here are just a few of the success stories in which Mountain Funding took over distressed situations and successfully managed and/or developed them to profitable outcomes:
- Hemet, California Land Parcel: Mountain Funding closed a $38 million acquisition and development loan on a 650-acre parcel, with the intent to finish up the entitlement, finish the site and build a retirement community and golf course. Our borrower was unable to complete the entitlement process, and additional environmental issues (endangered species and wetlands) surfaced. At a point in time, Mountain Funding negotiated a consensual takeover of the property and then, internally with its own team, completed the entitlements, graded the site and created super pads, built the golf course, and ultimately sold the super pads to a national homebuilder in a takedown schedule at an attractive profit to our original investment.
- Pikesville, Maryland Apartments: Mountain Funding closed a $52 million acquisition loan on a 255-unit, Class A apartment project to be converted to condominiums. The developer proceeded to empty out the rented units, but difficulties with the state delayed the registration of the condominium. Due to the delay, certain performance benchmarks were not met and, more importantly, the project’s opening was happening right when the market was slowing in late 2006. Rather than allow things to go from bad to worse, we: (a) refused to allow the condo to start closing units; (b) forced a turnover of the asset; (c) negotiated the termination of any condo contracts that were signed; (d) repaired and improved the property in preparation for a new leasing campaign; (e) brought the leasing up from 30% to 85% in less than four months; and (f) sold the property as-is to a national multifamily operator for a significant profit to our original investment.
- Mid-Western Retail Portfolio: Mountain Funding was the senior participant in a $20 million mezzanine loan on 25 Class B and C retail properties in tertiary markets of 13 different states, mostly in the Midwest. The mezzanine loan was subordinate to an $80 million senior loan. When the loan defaulted, Mountain Funding and its junior participant did the following: (a) assisted the borrower in refinancing with a REIT for 13 of the 25 properties, resulting in a $51 million repayment of the senior loan; (b) took ownership of the remaining 12 properties; (c) ultimately disposed of five of the 12 remaining properties at a profit to our basis; and (d) continued to asset-manage the lease-up and management of the remaining seven shopping centers, with DSC currently exceeding 2.5x on the remaining first mortgage.
- Florida Condo Portfolio: In mid-2005, Mountain Funding had loaned $178 million to a condo converter in Florida for four projects in different parts of the state. The borrower was slow to receive his condo approvals and commence sales. As a result, only about 30% of the units had sold when the market slowed to a crawl in mid-2006, and interest reserves had been depleted. Mountain Funding negotiated a consensual turnover of the four broken condos, and our internal team immediately commenced a new marketing sales effort that was going reasonably well until the sub-prime debacle began to surface in early 2007. At that time, we made the decision to stop selling before any of our competition did so, and we were able to lease up the remaining inventory from less than 30% occupancy to mid-90s today while the market occupancy is much lower. We are cash-flowing, and plan to continue the operation of the projects until the condo market returns somewhat and our capital can be extracted.
- Chicagoland Subdivision: Mountain Funding funded $3.8 million in mezzanine debt to be used for the acquisition and development of 522 lots in Lake County, Illinois. When the developer went bankrupt, Mountain took back the asset, completed the site development and ultimately sold the lots to national and regional builders resulting in a complete return of capital and profit.
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