Mc Apartments
Millegan Creek
Background:
Tom Hayden—March 1994, VP of commercial real estate at Fleet Bank
Proposed Loan: $15,715,000 on 390 Unit Apartment in Austin, Texas
-new market—new construction concern, new developer
-question about sponsors—financial capacity & development experience
-Lack of a commitment for permanent financing--takeout or permanent loan was how most construction loans are repaid
-past 5 years, Fleet + other commercial have lost billions because when construction loans became due, economics of project had decreased and no one was willing to make a permanent mortgage loan sufficient to repay
Tom joined Fleet in 1989 after 6 years at another bank
-spent the next 3 years working with troubled loans in “workout” division
-1992 Tom reassigned to originate new loans
-his assignment: seeking financing opportunities in real estate and help Fleet diversify its portfolio out of the Northeast
1st step: Tom researched best developers, met with mortgage bankers, attended forums + conferences, and read articles
-found active developer, JPI Multifamily, who survived Texas crash and was building large number of apartments
-introduced to principals at JPI by mortgage banker, Holliday Fenoglio, Dockerty, and Gibson
-Fleet preferred to work directly with developers—but would work with mortgage bankers if developer paid fee (1% of loan)
Early 1993, Holliday Fenoglio began sending Tom preliminary deal packages—to gauge Fleet interest in financing one of JPI large apartment projects
-reviewed proposals including projects that had takeout commitments from General Electric Credit Corporation
-because of strength of takeout, JPI wanted Fleet to finance 100% of cost—contrary to Fleet policy requiring developer’s to invest equity 10-20% of total cost
-Tom saw package in Dallas—but once visited it was eclectic neighborhood where hard to tell its direction—decided it was too difficult a location
November 1993: Holliday Fenoglio sent him package of
Background:
Tom Hayden—March 1994, VP of commercial real estate at Fleet Bank
Proposed Loan: $15,715,000 on 390 Unit Apartment in Austin, Texas
-new market—new construction concern, new developer
-question about sponsors—financial capacity & development experience
-Lack of a commitment for permanent financing--takeout or permanent loan was how most construction loans are repaid
-past 5 years, Fleet + other commercial have lost billions because when construction loans became due, economics of project had decreased and no one was willing to make a permanent mortgage loan sufficient to repay
Tom joined Fleet in 1989 after 6 years at another bank
-spent the next 3 years working with troubled loans in “workout” division
-1992 Tom reassigned to originate new loans
-his assignment: seeking financing opportunities in real estate and help Fleet diversify its portfolio out of the Northeast
1st step: Tom researched best developers, met with mortgage bankers, attended forums + conferences, and read articles
-found active developer, JPI Multifamily, who survived Texas crash and was building large number of apartments
-introduced to principals at JPI by mortgage banker, Holliday Fenoglio, Dockerty, and Gibson
-Fleet preferred to work directly with developers—but would work with mortgage bankers if developer paid fee (1% of loan)
Early 1993, Holliday Fenoglio began sending Tom preliminary deal packages—to gauge Fleet interest in financing one of JPI large apartment projects
-reviewed proposals including projects that had takeout commitments from General Electric Credit Corporation
-because of strength of takeout, JPI wanted Fleet to finance 100% of cost—contrary to Fleet policy requiring developer’s to invest equity 10-20% of total cost
-Tom saw package in Dallas—but once visited it was eclectic neighborhood where hard to tell its direction—decided it was too difficult a location
November 1993: Holliday Fenoglio sent him package of