cmart docs #4
TRANSCRIPT
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FINDING INNOVATIVE WAYS TO HELP COMMERCIAL PROPERTY OWNERS DURING THECURRENT ECONOMIC CRISIS
OUR APPROACH WILL ENSURE THAT YOU WILL MAINTAIN OWNERSHIP OF YOUR PROPERTY NO MATTER HOW
UNFAVORABLE THE MARKET CONDITIONS MAY BECOME
Commercial mortgage resolution trust company
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The current economic crisis, which has affected theUS real estate values, is projected to further devastatethe commercial real estate market over the next threeyears to the order of three trillion dollars.
MARKET CONDITION SUMMARY
CMARTs Assessment of the Impact of the Economic Crisis on Commercial Real Estate:Twenty years ago, the practice of securitized ING residential and commercial mortgages andinvestment banking firms began, forcing profits in early assigned numbers of these securities.Most consortiums and corporations that purchased these securities are typically basedoverseas, and as such, the current economic stimulus package was developed by thegovernment specifically to provide relief to homeowners by means of mortgage modification.The fact that none of these beneficiaries (overseas holdings corporations) fall within the
realms of the stimulus program, reveals their lack of incentive to discount the principal balanceof these notes, even in the midst of our current market downslide which has devaluated thecurrent real estate market to alarming proportions. Principal mortgage reduction, adjusted tothe current market value of real estate in the United States, is the only actual and validremedy available to the consumer.
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Traditional resolutions no longer
availableREFINANCING
The high vacancy rates experienced by commercial real estate owners has left them with no
other alternative but to subsidize the deferents from their monthly receivables (i.e. rent),
out of their pocket in order to maintain their mortgages. This is the case for the vast
majority of property owners. Most individuals who have purchased commercial real estate
in the last ten years will find that this type of out of pocket expenditure is unavoidable. It is
also unrealistic for even a short period of time. Furthermore, the declining market prices,
coupled with the fact that most commercial loans are due within five to seven years with abuilt in acceleration or balloon payment clause only serves to solidify the bleak forecast
ahead. This scenario eliminates the only traditional solution that commercial property
owners have had -REFINANCING.
Time is running outballoon payment
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Of course you can try to secure a loan modification; however, the question is whatexactly are you modifying? The fact is the only part of your loan a modificationapplies to is your interest and the discounted defiance will be applied to your
principal. The problem with that is the sharp decline in property values have leftmost properties over 100% encumbered, so you will essentially be holding theproperty for the bank in hopes that the market will rebound significantly in order torecoup your loss. The estimated time for a market up trend is approximately fouryears.
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It seems the only available method used by desperate propertyowners to sustain ownership of their property, is negotiating ashort sale with the bank. However, this option is not available forcommercial property owners. Although the majority of the banksclaim that they are willing to consider reducing the principalbalance by means of a short sale, only a small percent seem todo so. Also, a huge challenge is finding a buyer who can afford30% or more as down payment for the property. One must alsoconsider that this is not the worst of it since the commercial
market has just only begun to slip. It leaves the question, what willyou do next year? A short sale again? This is not a practicaloption.
Short Saleis it a remedy or more of aproblem ?
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The only feasible solution, which is obvious to all
commercial property owners, is to reduce their principal
balance by 50% of its current loan amount. By doing so,
the current rental income, which they are receiving, will
more than debt service . The only viable method whichcurrent financial markets offer for discounted principal
is through purchasing of the note at a discount.
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BEAT THE BANKS
We have devised a method that bypasses the veil which has been created by the
servicing companies, i.e. the banks. Once we have effectively determined who the final
holder of the security is, which is backed by your mortgage (most likely by oversea
corporations), we will offer to purchase your note at a discounted price . At this time,
we will have the property owner place their property into an LLC under the umbrella
of a holding corporation (a consortium ). The holding corporation will in turn
guarantee that for the duration that your property is being held by the LLC it will not
go into foreclosure. The holding corporation will obtain permanent financing based
on the discounted purchase price of the note. At anytime, you, the owner of the
property, may terminate the LLC and sell the property at any value above the
encumbrances(i.e. discounted note price), as well as the second note which will be
placed by the holding corporation as a part of its security.
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If the note is not performing and/or in litigation the beneficiary of the note normally would
be willing to sell the note at a 50% discount.
Having the funds available to purchase the note, even at a discounted price is the difficulty
which property owners face. We have this problem solved. Another complication in
purchasing the discounted note is finding the true beneficiary who is the holder of the
note. This is not possible by conventional means.
We have devised a method that bypasses the veil which has been created by the servicing
companies, i.e. the banks. Once we have effectively determined who the final holder of the
security is, which is backed by your mortgage (most likely by overseas corporations), we
will negotiate to purchase your note at a discount.
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Benefits to property owner:
Substantial reduction on mortgage balance
Property will be guaranteed against further chance of foreclosure during the
upcoming market decline
Your property will be managed by a national property management company for
a substantially reduced /negotiated amount
You as the owner continue to hold ownership of the property during the
duration of the venture
All receivables collected during the term of the negotiation , prior to the
purchase of the note ,will be reverted to the owner
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commercial realestate owners
audit loandocuments to find
inconsistencies
start a lawsuit onbehalf of the
property owner
establish a trustaccount
Duringdiscovery, findout name of
beneficiary ofthe note over
seas
Duringmediation,negotiate a
rewrite of loanmines attorney
fees
Litigation isneither
wanted nor
necessary
This step is for the purpose of determining the beneficiary overseas through thejudiciary system. Furthermore, as a non-performing note, we can obtain a greaterdiscount on the purchase of the loan . The receivables placed in the trust account bythe owner is theirs to keep and should we not be able to negotiate an amiable deal forthepurchaseof the note, we can get a discount by mediating with the bank,
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The next step of the process (and please note we have simplified it for presentational purposes)
after the purchase of the note by the investor, we will require the owner to place the property in a
LLC, as a subsidiary of the holding corp. i.e. the consortium. The consortium, having secured an
insurance guarantee, will obtain permanent financing as a take out loan to securitize the instrument
with prearranged terms through a bank and seal the security in the secondary market
The final contract will involve a complex stock swap and leverage financing but for the purpose
of this presentation, which has been highly simplified and summarized. This information will be
disclosed in detail after the final negotiation and approval from the beneficiary, for the purchaseof the discounted note.
CMARTHOLDINGCORP. i.e.
consortium
Take out loan (BANK)UNDERWRITE ANDPIPELINE,CMART
loans
Investment banking firmwill securitize the takeout loan according toinvestor guidelines
LLC.PROPERY
LLC.PROPERY
Ins. companyplacing the
guarantee forCMART.
INVESTORBUYING
PAPER 30DAY BRIDGE
LOAN
BENEFICIARY SELLSNOTE TO
OURINVESTOR