You’ve just closed a loan for a residential conversion of a commercial property. The LTV is on target and the DCR is sound. Then you pick up the paper and read an article like this, detailing how the residential-only property isn’t actually eligible for the mixed-use real estate tax exemption it was granted.
This is in many ways a nightmare scenario for any lender (including at least one CDFI that financed some of the properties in question): you have done your due diligence, requiring proof of approval for the exemption that makes the project viable, and now it turns out that the exemption was granted in error and will be rescinded. What are the next steps?
This search could have prompted questions from the underwriter regarding why the residential use conversion was eligible. It is very possible that the in-hand approval still would have won the argument, but this would have given the lender one more chance to avoid becoming victim to the city’s mistake.
In community development, nothing is a sure thing. Except, that is, excellent service from High Impact.
Contact us today to discuss your underwriting, portfolio management, and program development needs.