Needed Fractured Condos

We have fund that has a simple request…..”WE WANT FRACTURED CONDOS”.  Now I’m sure the next question you have is, what is a fractured condo?  In this particular case, the fund defines a fractured condo as a condominium development projects that was completed, units were selling….then the market disappeared.  Options are limited for the original developer or a bank stuck in this unfortunate position.

Currently the fund is looking for nationwide buying opportunities.  I can give a recent example.  In the southeast, a 200-unit high-rise condo project was completed.  50% of the units were sold and closed.  The market shifted, loan options to end buyers shifted, and the builder was left with 100 unsold condos.  In this particular case, the bank who has first lien position at $40 million was also under pressure from the FDIC to liquidate part of it’s portfolio.

The fund offered to buy out the developers position.  Yes the developer lost the original cash invested, however they walked away from $40 million of debt and a lot of headaches.  The fund then negotiated a discount with the bank to acquire the property for approximately $20 million.