franandaj
I'm so happy, I could BOUNCE!
- Joined
- Nov 15, 2009
- Messages
- 37,740
[Continued from Previous Post]
NOTE: If you want to skip the boring economics lesson, go to the next post!
Let me explain a little bit here. Back in 2005 Frans parents sold a rather large apartment building. They didnt consider me part of the family so I wasnt involved in a lot of the process, but with the money from the sale of the building, they did something called a 1031 exchange. The benefit of this exchange was that they did not pay taxes on the proceeds from the sale of the building.
What that means is that her parents took the cash from the sale of the building and let someone to hold on to it while they found properties of equal value for a new investment. They picked a mixture of Office buildings, residential properties, and oil royalties. A couple years later when one of the offices sold, Fran and I picked a shopping center and another residential property to roll her fathers money into as he was still alive. All in all when her father died there were seven of these Tenant in Commons making up about half her fathers (our) net worth. Four of the original six properties were managed by a company that was eventually taken over by Grubb and Ellis, the property that sold was rolled over into properties managed by other companies.
So the idea was great. There are 35 owners in each property, we all got paid monthly distributions because the properties were prosperous. The idea was to hold onto the properties for about five years, and then sell to roll them over into another TIC. Even better, the original owners would die and the heirs (Fran and I) would have a reduced cost basis and can cash out on the investments without the tax liabilities. No one anticipated a recession, property mismanagement or any of the other fiascos that occurred over the years.
So what it came down to is that Grubb and Ellis mismanaged all their properties so badly that eventually they went belly up. Daymark was formed by G&E to put an arms length between their name and the new company name, but eventually a group named Sovereign Capital purchased Daymark and here we are today. Of the three properties held by Daymark, two have lost so much value that in todays economy they are barely worth the amount of their mortgages. That is why we are at this meeting to find out about what is up with the offer this company is going to make with the tanking office building. Later in the weekend we found out that the meeting we are skipping in May is for residential properties because they have divided up those into a separate REIT from the office buildings.
So back to the dinner meeting. Here we are seated at a table with a bunch of other folks in our similar situation. Some of you might know that there is one property that we are rather excited about because it is actually going to sell and at a profit from what her father initially invested. Well this property is outside of Houston and one of the ladies at our table was from Houston and a fellow investor in that property. It turns out that by some miracle, Exxon happens to be moving to that area of Texas, and so everyone wants to be in that location. Cha-ching! Thats why this one property is doing so well while all the other 100+ properties that Daymark acquired are failing.
At dinner we also learned that the other investors were getting together at 10AM in the lobby to discuss possible options, so I was glad that we were in attendance for this opportunity to discuss things. I didnt take any pictures at dinner because I didnt think it was appropriate. It was nothing special, we started with a weed salad that had some almonds and pears. The entrée was a chicken breast with some roasted potatoes and onions, and about four green beans. Dessert was some sort of white chocolate panna cotta with raspberries. Then came the presentation, it was basically a power point thing showing us in a nutshell why the proposal they would be presenting in detail the next day was our only option. I was surprised when the entire evening was finished at 7:30PM.
We decided to go visit the sorry excuse for the casino. We spent about an hour at the video Blackjack table and ended up gaining back the money Fran lost earlier that morning and I got back my five bucks I lost that afternoon. While they changed dealers periodically like a regular table, this is what the screen looked like.
Personally, I dont care to sit a watch a ho like anorexic woman in a teddy with oversized breasts who is programmed to appear to be flirting with the patrons. I like my living, usually homely looking dealers, that rarely flirt with the gamblers. It was amusing, but we arent likely to drop much money at one of those tables. We were still hungry and decided to get a bite to eat. There was a restaurant in the Casino and we checked out the menu, but nothing looked really good. There is a place in Long Beach that we like called the Auld Dubliner, its an Irish pub and has pretty standard fare. There was one of these in the Village so we ended up there. I recognized a lot of the other patrons as being from our same group. We had some Fish and Chips. I ordered a Black and Tan as well. Sorry about the crappy picture, I took it with my phone.
While we were eating a lone guitar player started setting up to be the nights entertainment. Though we had settled up the check, Fran felt sorry for the guy and told me I could order another drink while we listened to him. They brought me one heck of a Martini and even brought me an extra shot to go along with it! We ended up leaving at around 10PM and went back to the room where I thoroughly enjoyed the bathtub. The only thing that could have been better was if it had jets like the DVC Jacuzzis!
The next morning we woke up fairly early, watched some TV had breakfast in the room from the cinnamon/raspberry/chocolate loaves we bought, the coffee from the room and a Berry Blast Naked Juice I had brought in the cooler. The Bellman picked up the bags and helped me load them in the car around 9:30 and at 10:00AM we headed down to the lobby to find a group of people seated around a table. One guy started to run the discussion and he started to go on about how he didnt see how they could have let our investments get to $.18 on the dollar. Other people started griping about how they had all the reports that they had sent us and why did we only get a cash flow report and not an actual accounting of expenses. Stuff started flying all around, Did you read the proposal of the other management company? It was cacophony!
Finally the dude in charge suggested that we compile a list of questions that we demand that they answer. His wife began to dutifully write them all down, Is our property in Technical Default?, can we spend up to $50,000 of the unreserved capital to get an independent attorney and accountant in to look at these books? The questions went on and on and on and most of the group agreed to walk out if we didnt get our questions answered before the evildoers gave their presentation. Fran and I began texting each other during this barbaric exchange. The things they were talking about were stuff like, take money from repairing the garages, if we dont have enough money to pay the mortgage! Why cant we just lease the space to the existing tenant who is interested? And why do we need to pay a broker a commission? It was pretty clear that these folks were grasping at straws. We were getting pretty sick of their attitudes and were happy when they finally decided to disband and we could leave without being rude.
The bottom line is that this property is not taking in enough rent to pay the mortgage, Capital Improvements are necessary to make it ready for a new tenant to occupy the space. We will be in default on our Mortgage in about 10 days. We are in trouble, why do these people think that they can fix it when the people who professionally manage commercial properties have been trying to for the past three years? We should have agreed to sell it two years ago when management suggested it, but they were dumb back then too.
So at noon we headed to our designated meeting room where lunch was to be served. The morning meeting was still going on even after 12 (they were supposed to end at 11), so we waited. Finally we got into the room and were able to grab our lousy boxed sandwiches with a pack of chips off a table and eat. At 1:00PM the Brass came into the room and started the meeting.
Immediately, the guy appointed spokesperson stood up and said, We have some questions that we want answered! Well as it turned out, there were four other meetings going on for other properties. The various speakers were traveling from meeting to meeting with the exception of our Property Manager and our Realty Advisor. All the other people had to give the same presentation at the other meetings and were on a strict time limit. The good ole boys agreed to let the first speaker go first, but wanted to make sure the questions were next.
This first guy was a lawyer and all I had to hear was his part of the deal. Basically the proposal was that we turn our property over to this REIT. We get units in the REIT and Wall Street Corporations come invest money into the REIT and expect a 22% return. This is where it was fuzzy, somehow some other property owners who have no equity at all left, put their properties in and somehow, by renegotiating their loans, they fund our loans. Remember we still have 18% equity left where as some others have zero. And somehow the Wall Street guys make money off of this, and we have the potential to do so.
Here was the clincher, if we do not go for the REIT idea, we have to spend the rest of our financial lives working out solutions with these other imbeciles. That means in two years we have to agree on terms for a new loan, agree on a new management company and a whole lot of other things! We didnt even agree with them on the walking out of the meeting tactic, much less all these other things. And the other implications are huge, evidently in this situation a foreclosure is viewed by the IRS as a gain!
Even though you lose all your money, it has something to do with the loan going into default that the amount of the loan in your itty bitty 2% looks like you had a few hundred thousand dollars gain! Its a paper gain, not a monetary one, so in addition to losing all your money you are taxed on it as if you gained it!
The only way out of the this sucky situation is what they are proposing. Otherwise we stay in bed with these other owners forever or until we pay off the foreclosure, which ever comes first. This was about 1:20PM when this hit me like a sledgehammer. For another 2 ½ hours we sat in that meeting room listening to the good ole boys bicker about carpeting, who didnt disclose what, yadda yadda yadda.
Towards the end of the meeting another legal type was speaking and he explained that a few years ago a client came to him about this situation (foreclosure on their TIC and having a huge tax liability). Then more and more of these situations started popping up. Turns out their entire reason for taking over Daymark last Summer was to get us to this point. Sit us all down in a room and propose this whole REIT situation. Now they must be making some money out of it (a pretty penny from the work they are going to), but they said that they would really like to help us poor little TIC owners, of which there are some 40,000 in lousy situations like we are. Fine, I had decided over two hours ago, to take your little plan, now can we please leave so that I can have a Martini and play some Blackjack with a real dealer!
Eventually by 4PM, we were done. The nice thing was that they gave us $250 per person in Travel Voucher. Actually it was just a check for $250. I still have to put them in the bank, but that was money for us. At this point we had only shelled out, cash for a buffet dinner, buffet breakfast, some tips, Fish and chips, and drinks. I estimate that we were still ahead.
[Continued in Next Post]
NOTE: If you want to skip the boring economics lesson, go to the next post!
Let me explain a little bit here. Back in 2005 Frans parents sold a rather large apartment building. They didnt consider me part of the family so I wasnt involved in a lot of the process, but with the money from the sale of the building, they did something called a 1031 exchange. The benefit of this exchange was that they did not pay taxes on the proceeds from the sale of the building.
What that means is that her parents took the cash from the sale of the building and let someone to hold on to it while they found properties of equal value for a new investment. They picked a mixture of Office buildings, residential properties, and oil royalties. A couple years later when one of the offices sold, Fran and I picked a shopping center and another residential property to roll her fathers money into as he was still alive. All in all when her father died there were seven of these Tenant in Commons making up about half her fathers (our) net worth. Four of the original six properties were managed by a company that was eventually taken over by Grubb and Ellis, the property that sold was rolled over into properties managed by other companies.
So the idea was great. There are 35 owners in each property, we all got paid monthly distributions because the properties were prosperous. The idea was to hold onto the properties for about five years, and then sell to roll them over into another TIC. Even better, the original owners would die and the heirs (Fran and I) would have a reduced cost basis and can cash out on the investments without the tax liabilities. No one anticipated a recession, property mismanagement or any of the other fiascos that occurred over the years.
So what it came down to is that Grubb and Ellis mismanaged all their properties so badly that eventually they went belly up. Daymark was formed by G&E to put an arms length between their name and the new company name, but eventually a group named Sovereign Capital purchased Daymark and here we are today. Of the three properties held by Daymark, two have lost so much value that in todays economy they are barely worth the amount of their mortgages. That is why we are at this meeting to find out about what is up with the offer this company is going to make with the tanking office building. Later in the weekend we found out that the meeting we are skipping in May is for residential properties because they have divided up those into a separate REIT from the office buildings.
So back to the dinner meeting. Here we are seated at a table with a bunch of other folks in our similar situation. Some of you might know that there is one property that we are rather excited about because it is actually going to sell and at a profit from what her father initially invested. Well this property is outside of Houston and one of the ladies at our table was from Houston and a fellow investor in that property. It turns out that by some miracle, Exxon happens to be moving to that area of Texas, and so everyone wants to be in that location. Cha-ching! Thats why this one property is doing so well while all the other 100+ properties that Daymark acquired are failing.
At dinner we also learned that the other investors were getting together at 10AM in the lobby to discuss possible options, so I was glad that we were in attendance for this opportunity to discuss things. I didnt take any pictures at dinner because I didnt think it was appropriate. It was nothing special, we started with a weed salad that had some almonds and pears. The entrée was a chicken breast with some roasted potatoes and onions, and about four green beans. Dessert was some sort of white chocolate panna cotta with raspberries. Then came the presentation, it was basically a power point thing showing us in a nutshell why the proposal they would be presenting in detail the next day was our only option. I was surprised when the entire evening was finished at 7:30PM.
We decided to go visit the sorry excuse for the casino. We spent about an hour at the video Blackjack table and ended up gaining back the money Fran lost earlier that morning and I got back my five bucks I lost that afternoon. While they changed dealers periodically like a regular table, this is what the screen looked like.
Personally, I dont care to sit a watch a ho like anorexic woman in a teddy with oversized breasts who is programmed to appear to be flirting with the patrons. I like my living, usually homely looking dealers, that rarely flirt with the gamblers. It was amusing, but we arent likely to drop much money at one of those tables. We were still hungry and decided to get a bite to eat. There was a restaurant in the Casino and we checked out the menu, but nothing looked really good. There is a place in Long Beach that we like called the Auld Dubliner, its an Irish pub and has pretty standard fare. There was one of these in the Village so we ended up there. I recognized a lot of the other patrons as being from our same group. We had some Fish and Chips. I ordered a Black and Tan as well. Sorry about the crappy picture, I took it with my phone.
While we were eating a lone guitar player started setting up to be the nights entertainment. Though we had settled up the check, Fran felt sorry for the guy and told me I could order another drink while we listened to him. They brought me one heck of a Martini and even brought me an extra shot to go along with it! We ended up leaving at around 10PM and went back to the room where I thoroughly enjoyed the bathtub. The only thing that could have been better was if it had jets like the DVC Jacuzzis!
The next morning we woke up fairly early, watched some TV had breakfast in the room from the cinnamon/raspberry/chocolate loaves we bought, the coffee from the room and a Berry Blast Naked Juice I had brought in the cooler. The Bellman picked up the bags and helped me load them in the car around 9:30 and at 10:00AM we headed down to the lobby to find a group of people seated around a table. One guy started to run the discussion and he started to go on about how he didnt see how they could have let our investments get to $.18 on the dollar. Other people started griping about how they had all the reports that they had sent us and why did we only get a cash flow report and not an actual accounting of expenses. Stuff started flying all around, Did you read the proposal of the other management company? It was cacophony!
Finally the dude in charge suggested that we compile a list of questions that we demand that they answer. His wife began to dutifully write them all down, Is our property in Technical Default?, can we spend up to $50,000 of the unreserved capital to get an independent attorney and accountant in to look at these books? The questions went on and on and on and most of the group agreed to walk out if we didnt get our questions answered before the evildoers gave their presentation. Fran and I began texting each other during this barbaric exchange. The things they were talking about were stuff like, take money from repairing the garages, if we dont have enough money to pay the mortgage! Why cant we just lease the space to the existing tenant who is interested? And why do we need to pay a broker a commission? It was pretty clear that these folks were grasping at straws. We were getting pretty sick of their attitudes and were happy when they finally decided to disband and we could leave without being rude.
The bottom line is that this property is not taking in enough rent to pay the mortgage, Capital Improvements are necessary to make it ready for a new tenant to occupy the space. We will be in default on our Mortgage in about 10 days. We are in trouble, why do these people think that they can fix it when the people who professionally manage commercial properties have been trying to for the past three years? We should have agreed to sell it two years ago when management suggested it, but they were dumb back then too.
So at noon we headed to our designated meeting room where lunch was to be served. The morning meeting was still going on even after 12 (they were supposed to end at 11), so we waited. Finally we got into the room and were able to grab our lousy boxed sandwiches with a pack of chips off a table and eat. At 1:00PM the Brass came into the room and started the meeting.
Immediately, the guy appointed spokesperson stood up and said, We have some questions that we want answered! Well as it turned out, there were four other meetings going on for other properties. The various speakers were traveling from meeting to meeting with the exception of our Property Manager and our Realty Advisor. All the other people had to give the same presentation at the other meetings and were on a strict time limit. The good ole boys agreed to let the first speaker go first, but wanted to make sure the questions were next.
This first guy was a lawyer and all I had to hear was his part of the deal. Basically the proposal was that we turn our property over to this REIT. We get units in the REIT and Wall Street Corporations come invest money into the REIT and expect a 22% return. This is where it was fuzzy, somehow some other property owners who have no equity at all left, put their properties in and somehow, by renegotiating their loans, they fund our loans. Remember we still have 18% equity left where as some others have zero. And somehow the Wall Street guys make money off of this, and we have the potential to do so.
Here was the clincher, if we do not go for the REIT idea, we have to spend the rest of our financial lives working out solutions with these other imbeciles. That means in two years we have to agree on terms for a new loan, agree on a new management company and a whole lot of other things! We didnt even agree with them on the walking out of the meeting tactic, much less all these other things. And the other implications are huge, evidently in this situation a foreclosure is viewed by the IRS as a gain!
Even though you lose all your money, it has something to do with the loan going into default that the amount of the loan in your itty bitty 2% looks like you had a few hundred thousand dollars gain! Its a paper gain, not a monetary one, so in addition to losing all your money you are taxed on it as if you gained it!The only way out of the this sucky situation is what they are proposing. Otherwise we stay in bed with these other owners forever or until we pay off the foreclosure, which ever comes first. This was about 1:20PM when this hit me like a sledgehammer. For another 2 ½ hours we sat in that meeting room listening to the good ole boys bicker about carpeting, who didnt disclose what, yadda yadda yadda.
Towards the end of the meeting another legal type was speaking and he explained that a few years ago a client came to him about this situation (foreclosure on their TIC and having a huge tax liability). Then more and more of these situations started popping up. Turns out their entire reason for taking over Daymark last Summer was to get us to this point. Sit us all down in a room and propose this whole REIT situation. Now they must be making some money out of it (a pretty penny from the work they are going to), but they said that they would really like to help us poor little TIC owners, of which there are some 40,000 in lousy situations like we are. Fine, I had decided over two hours ago, to take your little plan, now can we please leave so that I can have a Martini and play some Blackjack with a real dealer!
Eventually by 4PM, we were done. The nice thing was that they gave us $250 per person in Travel Voucher. Actually it was just a check for $250. I still have to put them in the bank, but that was money for us. At this point we had only shelled out, cash for a buffet dinner, buffet breakfast, some tips, Fish and chips, and drinks. I estimate that we were still ahead.
[Continued in Next Post]
Looks like a good time to be had by all.
we did! 
Now that I think of it, we ended up at the one in Alexandria about a year ago, but that time we only did apps and drinks.
