In this team meeting, Speaker A debriefs Katya on a recent commercial‑to‑multifamily acquisition they pursued. The property is an industrial site that has already been entitled for a 300‑plus‑unit multifamily project. Katya sourced the deal via Deal Hunter. The team initially presented three financing options: (A) no money down, (B) some money down with no payments, and (C) an equity‑based structure with a 7% return over two years. The seller rejected the first two, combined elements of them, and then counter‑offered a $4 M down payment, an $8 M note at 5% interest, and a 9‑month closing window. The team countered with a $4 M down, 0.5% interest, and a 9‑month close, but the seller pushed for 3.5% interest. Recognizing that a seller demanding a note for two years and aggressive terms would likely be a difficult partner, the team decided to walk away, likening the situation to a bad first date. Katya gracefully declined, leaving the door open for a preferred “Option C” if the seller re‑considers. The seller then reverted to the original “Option B” terms, which the team had already dismissed. Katya uncovered that the seller’s highest prior offer was $9 M (six years ago), whereas the team’s current offer was $12 M plus interest, highlighting a significant valuation gap. The discussion ends with the team acknowledging the deal’s accidental discovery and moving on to other participants (Amor, Laura, Blake).
Chapters
Were you in the deal room today? Let's go talk to Katya about her deal because we were working this over the weekend. I know that that's going. Katya, you feel like pulling yours up and sharing real quick?
Yes, I can do that.
Awesome. And then Amor, if you want to be ready next and we can jump to Laura or Blake after that. So Katya's deal, right? We had, we had a lot of activity last week. We'll do a rundown real quick of it. So we made an offer on this property and Katya found this deal on Deal Hunter. It's a, it's an industrial space right now that had a lot of work done to it by previous, you know, previous interested parties where they did all the entitlement work to get it zoned, annexed, and approved for 300+ doors multifamily, right? That's what the advertising says. So we made our offer based on the advertising. We told them you get option A, no money down, option B, Some money down, no payments. So no money down payments. Some money down, no payments. Which one do you want? They said neither. We want a different option. So Kathy and I looked at it. We're like, well, we're going to be raising capital for this. We know in our next set of capital stack we're going to raise equity. What if we offered them equity? Because they did like the idea of getting money down and they liked the idea of getting 5% interest at the same time. So what they did was they took our two options and combined them and said, this is what we like. And we said, no, no, no, no, no. Can't do that. Can't do that. Can't do that. So we said what we can do is we redesigned the deal so they understood them again. We gave them the third option of equity and we said Kathy was brilliant enough to say what we would like to do is give you 7% instead of 5%. And instead of holding a note for 2 years, hold equity for 2 years, guaranteed payout. And they said no. They said no. Okay. And then what did we say? They said they came back. They said no, but they came back and said what we'll do is because they wanted, they wanted $4 million down, $8 million note, 5% interest paid at the end. Yeah, we said, we said option B was $4 million down, no money, no money paid for, for 2 years, and it was going to be 0.5% interest, and we needed 9 months to close. And they were like, eh, we'll give you the 9 months, but we want 3.5% interest. And so Katya and I said next. The reason why we said no was because This person is going to be holding a note for us for 2 years. If they're going to negotiate like this, we're probably going to be struggling for the next 2 years with these people, right? And then so it's kind of like a difficult date. Like you go on a date with somebody and it's difficult to get through a conversation. There's a really good chance if it's difficult in the first 10 minutes of meeting somebody, it's probably going to be difficult after 10 years too. Probably way more difficult. So it's better to walk away from the table than it is to sit there and continue to try to snort salt. So Katya responded gracefully and said, no, we're not interested. But if you change your mind, we would be interested in Option C. We like that one the best. Our other options are pretty much no longer an option. And they responded, can we go back to Option B now, please? Which was originally $4 million, carrying a note for $8 million, 2 years, and a 0.5% interest. So now they want the deal we offered them back in the beginning. And here's Here's the best part. Katya was brilliant enough to discover that they had a $9 million offer 6 years ago and answered.
Yeah, $9 million was their highest offer ever.
We offered them how much?
$12 million. Plus interest.
Wow. Yeah.
I can't believe that they're like calculating the interest.
I gave them, I gave them a significant increase to be a partner. And what they did was they acted like a socialized chimpanzee from the Brookfield zoo, cocked it in their hand and threw it back in our face. And so that just makes me— I'm not interested no more. Like, there's other— here's the thing I know: Katya found this on accident.
