Baker Development Corporation’s Asset Maximization Program (AMP) is a viable alternative to a bank that is considering: 1) disposing of a fractured asset at distress values or 2) attempting to act as the developer and directly marketing to the public despite the stigma that a “bank sale” is a “distressed sale.” Instead of incurring a sure loss under either scenario or committing additional capital to complete the project by engaging a general contractor who is adverse to the Bank, BDC partners with patient lenders and property owners by stepping in as the intervening developer to provide a) new funds needed to complete the project, b) development expertise, and/or c) prestige needed to re-brand and re-market the property. The lender avoids throwing the proverbial “good money after bad,” the stigma associated with a “bank” or “distressed” property is removed and potential for a significantly higher payoff is breathed into the project.
Here is how the program works:
- A lender has an asset on the books, the value of which is impaired because significant construction work remains and the lender will no longer commit additional funds to complete the project.
- The lender and BDC enter into a partnership agreement that contemplates BDC committing the construction funds necessary to complete the project in exchange for a percentage of the sale proceeds.
- BDC takes the construction risk and guarantees the construction cost to the partnership.
- BDC rebrands and remarkets the asset and after recouping its investment, shares the sale proceeds with the lender pursuant to the partnership agreement.
Recently, BDC partnered with a well-known Chicago-based bank that had foreclosed on 16 town homes and 6 condos out of a total of 32 units. All 22 units were in various states of completion. The bank had an “as-is” appraisal of $4 million for the property. The bank entered into an AMP agreement with BDC and through a combination of BDC funding, rebranding, remarketing and completing the construction of the units, it is anticipated that the bank, in one year, will recover nearly $8 million — an almost 100% value-add through the AMP program.
If you are a bank who can afford to be patient, BDC will show you how we can make your patience pay off!