<Back

QUICK PIVOT DURING A CRISIS: CREATING A NOTE SALE MARKET

The Result: In response to the market crash and loan fallout during the Great Recession of 2007-09, Kiser Group devised a system for selling notes secured by multifamily assets, resulting in 20% higher returns to our lender clients, novel opportunities for investors, and relief in many cases for multifamily owners.

Challenges and Solutions:

During the Great Recession, lenders faced pressure from the Federal Government to sell loans secured by apartment buildings to meet liquidity requirements. Recognizing the need for expertise in valuing these loans and the underlying real estate assets as well as an actual market to sell and buy these investments, Kiser Group created a niche, assisting lenders, investors, and owners in facilitating successful transactions.

Pressure to sell troubled loans:

Lenders were under pressure to sell loans from their portfolios to remain in compliance with FDIC regulations during the recession, but their only buyers were discount note purchasers without experience in the multifamily market who would only pay very low prices for these loans.

A novel market created:

Understanding the needs of lenders and the investment parameters of its client base, Kiser Group created a market to introduce note sales secured by multifamily properties to apartment owners and buyers. Due to its expertise and analysis of the underlying real estate assets, Kiser Group was able to facilitate transactions with real estate owners and investors who were interested in purchasing these loans at reasonable and competitive values to acquire the apartment properties.

Huge knowledge gaps:

Note sales required specialized knowledge that most apartment building owners and investors did not have. In purchasing a note, the investor stepped into the shoes of the lender and then needed to deal with the loan on the property before owning the underlying asset. Without the expertise in lending, real estate investors were reluctant to purchase notes.

Demonstrating value:

Understanding both the lending side as well as multifamily investing, Kiser Group advised lenders on appropriate values for their loans and was instrumental in helping apartment buyers appreciate and navigate the investments. A variety of outcomes resulted, including, in some cases, a negotiated refinance for the current building owner or a note sale to a new real estate investor. In all cases the lender was able to realize a higher price because it was selling notes to real estate professionals, not opportunistic financiers.

Bureaucracy:

Each lender client had unique confidentiality and compliance standards for data related to troubled loans, sometimes specifying the vehicle through which information could be disseminated.

Unique processes created:

Understanding the distinct needs and requirements of each lender, Kiser Group quickly and efficiently created a unique note sale process for each client. In an era before cloud systems were widely used or considered secure, Kiser Group agents personally reviewed, assembled, secured, and distributed required documents in accordance with the lender’s needs and confidentiality constraints, resulting in a seamless and efficacious process.

Author:

Staff