657 Flower Ave, Venice

another successful land closing at 657 Flower Ave in Venice, CA.

​This is the 11th property that we've sold for this same bank, but the first one since 2021 because there were very few foreclosures in Los Angeles when interest rates were at all time lows. Now that rates have basically doubled in a short period of time, there seems to be a growing pipeline of bad debt, mostly coming from failed developments. We don't see signs of distress on existing multifamily, and in fact we're feeling growing optimism from apartment investors in the early parts of 2024. For now, the distress is coming from investors who received expensive construction, bridge, or hard money loans for new development or heavy value add deals.

Deal Story

Our bank-client entered into this deal in early 2018 when they gave a construction loan to the previous owner. That previous owner was planning on splitting this 5,800 square foot lot into two separate parcels. After the lot split, he would then build two duplexes, one on each newly created parcel (APN), with the end goal of building 4 total units on this lot. Of course, the City planning department and more specifically, Coastal Commission, made this goal nearly impossible to achieve. After years of getting nowhere with these government bodies, the previous owner stopped all loan payments and ceased all communication with our bank-client. At the time, this was a good client of the bank's with tens of millions in loans on many different properties, so the bank gave a lot of leeway hoping for a resolution. After more than a year went by without loan payments, the bank decided to record a notice of default in July 2023. After going through the California foreclosure process, which takes at least 201 days to complete (nearly 7 months), the bank officially took ownership of the property on January 19, 2024.

Our bank-client reached out to us a couple months before they took ownership. They informed us of this future listing that they would give to us and asked us to start reaching out to potential buyers. We went to work calling our rolodex of developers and quickly got three interested buyers. One buyer emerged from the rest when he signed a fully non-contingent and all cash offer at $1,175,000 with a quick 14 day close. This offer also had a large $100,000 deposit that would be immediately non-refundable at the opening of escrow, showing complete commitment from the Buyer.

We had this offer signed by the buyer and ready to go before...