In Search of the Perfect Investment

The distress commercial office building. Several years ago. at the height of the boom, a big institution bought the property for around $20 million, taking a mortgage of $12.5 million. The mortgage now needs refinancing. Rents have fallen. The building is worth less. The bank won’t refinance, except for much less. The institution won’t (or can’t) put more equity in. It is at an impasse. It sells the building for essentially the value of the mortgage.

The new owner puts in $5.6 million of equity and secures $7.1 million bank financing.  There’s money for a new roof, some other fixups and a redecoration of the lobby. The building is now on a solid financial footing, even with the likely lower rents. It should return its new owners a 15% IRR. That’s based on  conservative assumptions.

I have seen several deals like this. The thread seems to be an institution taking a bath. In this case, the institution lost all its equity.

I have theories on why institutions are ready to walk from their properties. Most seem to be lousy property managers, without the patience or skills to do workouts.

How to find similar deals? There is no simple answer. Your local bank might be a good place to start. Knowing who owns what in your local community and what they paid is another good place to look.

What a wonderful movie. Please see it.

How to make a movie. Remember the video “We The People” which my friend put onto YouTube and got 9.4 million  (now 9.5 million) views? A reader asked how was it done? Answer from the director:

I used Final Cut Express ($!69). That works pretty good, if you’re on a budget. I’m presently working with Final Cut Pro, (about $800)  which is much, much easier to create a great video in a timely manner. It comes with component applications, Compressor, DVD Studio Pro, etc. If you can swing Final Cut Pro, you will definitely be glad you did. Everything works like it’s supposed to. And once you get it, you will from then on have the ability to make great movies. Compressing large videos into YouTube ready videos becomes simple. Burning different videos into different formats becomes a snap. Authoring Blu-Ray and HD video discs are easy. There’s lots of great tutorials on YouTube.

I’ve used the other cheap (and also very expensive) movie production software, and it’s generally non-intuitive, and problematic, making it difficult to complete anything.

I once tried Adobe Premiere Elements for the PC and gave up on it. Too complex for my tiny brain.

Disclaimer: I personally don’t go along with the politics of We The People. I am impressed with the production quality and professionalism of the end result. It comes from a lady friend of mine who conceived, wrote, spoke and financed the whole thing herself.

National car rental has seductive ads. I proudly tell my daughter I am booking with them. Their ads say I could grab any car in the lot and go. I could get a nice car for a bargain price.

“No,’  Claire said, “You idiot. The ad doesn’t say ‘Chose any car in the lot and go.’ It says “choose any car in the aisle and go.’ You can have a red one, a blue one, a green one. But it’s the same old crappy car.”

Aren’t children wonderful?

How to install a home security system. This is really silly.

1. Go to a secondhand store and buy a pair of men’s used size 14-16 work boots.

2. Place them on your front porch, along with a copy of Guns & Ammo Magazine.

3. Put four giant dog dishes next to the boots and magazines.

4. Leave a note on your door that reads:

“Bubba,

Bertha, Duke, Slim, & I went for more ammo and beer. Be back in an hour.

Don’t mess with the pit bulls; they attacked the mailman this morning and messed him up bad. I don’t think Killer took part, but it was hard to tell from all the blood.

Anyway, I locked all four of ’em in the house.

Better wait outside. Be right back.”

–“Cooter”

Harry Newton who is ecstatic this morning. The sun has returned to New York.  Scott’s stock recommendations from yesterday still look very interesting.