Seller Financing

4912 W. Point Loma Blvd, 92107

4912 W. POINT LOMA BLVD, 92107 (8 UNITS)
SOLD WITH INTEREST ONLY SELLER FINANCING

In the first quarter of 2023, Palma Commercial retained the exclusive listing to market and sell 4912 W. Point Loma Blvd., an eight (8) unit apartment property backing up to Robb Field, approximately three blocks from the beach.

After presenting to the open market, a softening market was confirmed, such that prices of 9 months prior were no longer achievable today. One of the key elements causing the slowdown was surging interest rates. Seller and broker agreed that offering attractive seller financing could potentially help to achieve ‘yesterday’s prices’, which turned out to be a good option for this Seller, as they had no debt against the property. After marketing the property between $4.1M and $3.995M over several months, once the offering was adjusted to reflect *Attractive Seller Financing*, more serious interest quickly followed, resulting in a deal at $4.1M that closed in June, 2023, with Buyer putting 27% down, and Seller carrying the rest at a very attractive 5% interest only rate. Seller in this case wanted quarterly payments in advance, and so received $1.1M minus closing costs along with the first quarterly payment at close of escrow, then receives the $37,500 quarterly payments on Jan/Apr/Jul/Oct 1st. Quarterly payments, as well as all other terms, are just a matter of preference, as someone else could have just as easily opted for monthly payments of $12,500. At the end of the loan term, Seller will receive the original loan balance of $3M in full, as this was an interest only loan.

For capital gains tax planning purposes, it is also wise to consider going with a fully amortized loan, as opposed to interest only, as a seller can further mitigate some capital gains tax consequences this way. Seller opted to keep it simple on this one.

4657-85 Muir Avenue (“Muir Gardens”)

4657-85 MUIR AVE. (25 UNITS) + 4682-92 W. POINT LOMA BLVD. (19 UNITS)
SOLD WITH INTEREST ONLY SELLER FINANCING

In the second quarter of 2023, shortly after having just confirmed the importance of Seller Financing in the current environment with the sale of 4912 W. Point Loma Blvd. (above), the same client, Mills Trust, awarded Palma Commercial the right to market and sell a few of their larger apartment properties in Ocean Beach, at 4657-85 Muir Avenue (“Muir Gardens”), and at 4682-92 W. Point Loma Boulevard, totaling 44 units, with a unit mix ratio of around 61% 2br/1ba units, and 39% 1br units, plus 32 garages, multiple laundry rooms and storage lockers.

Once again, Palma was able to facilitate a deal that met Buyer and Seller needs, with the help of attractive Seller Financing. Buyer paid $23,600,000, reflecting a blended Price/unit of $536,363, and a blended price/SF of RBA at $727. This portfolio deal was highlighted by CoStar as one of top 5 ‘Deals of the Quarter’ for all commercial real estate transactions across San Diego County (Q3,2023), after it closed on August 11. Seller received around $9.38M at close of escrow minus closing costs (39% down plus initial quarterly payments), then receives 5% interest only quarterly payments of $180K every Jan/Apr/Jul/Oct 1st, until the balloon payment of $14.4M becomes due within several years. By virtue of these being garden-style low-rise properties on large lots, within the city of San Diego Transit Priority Area, Buyer was able to utilize their construction/design acumen to gain approvals for adding over 30 more units across all of these (3) properties, shortly after taking ownership.

The promissory notes are each secured by a Deed of Trust that grants the note holder with the right to foreclose and take the property(ies) back in the event of borrower (buyer) default.