I recently got an unexpected lunch invitation. The most successful real estate developer I know made a beeline for me in the church lobby. He requested lunch as soon as possible.
We met for lunch the next day. We hadn’t even ordered when he started pouring out his heart:
“I’ve got a problem. I’ve been doing business with two banks for decades. One of the bankers has become a close personal friend.”
He paused with a pained, pensive stare at nothing.
“But they’re both acting…weird. They seemed nervous last fall. But now it’s more serious than that.”
He went on to describe how his favorite banker changed the terms and then outright canceled an approved loan days before closing a few weeks before. This deal had been in the works for well over a year. My friend had to make a painful phone call to the seller to sheepishly ask for an extension to a now-uncertain closing date.
He was meeting with me because he knew I invest in commercial real estate. But my friend didn’t need equity. He had that. He needed a new source of debt.
“I’m done with banks,” he said. “I’ve got to find a private lender I can trust. We’ve got a series of land acquisitions in the works, and I will not be screwed again!”
“It was the managers who should have been wearing the ski masks.” – Warren Buffett, referring to savings & loan associations in the early 1990s.
I didn’t expect this. As I said, this is no small developer. This three-generation professional operation does large deals with Ryan Homes, D.R. Horton, etc. One of their upcoming developments is platted for 8,000 residential lots, and 1,000 are presold to a national homebuilder.
I would have been surprised…if I hadn’t seen lenders pull back in the last cycle. And the one before.
It was ironic timing because I was planning to sit down to write about our newest operating partner and investment that day.
Investing in a Private Debt Fund
We’re not…