2792 East Point Street (former Methodist Church)
The purchase of the former Methodist church property is scheduled to close at the end of June. Over the past week we have received an excellent term sheet for a construction loan of $1,100,000 from the Reinvestment Fund, a CDFI based in Philadelphia. One point in origination fees and interest floating at 5.25 percent above LIBOR (Today's interest rate would be less than 6%). The Reinvestment Fund will hold their terms until we complete the remaining conditions for underwriting. The construction loan will run for 2 years with no prepayment penalty. Two years is enough time to complete the renovations and lease up the remainder of the small offices and the apartments. We currently have pre-lease over half of the building. The sanctuary space will be leased to a local advertising outfit as their office.
This week we are in negotiation with several parties interested in filling in the last $200,00 of the LLC "B" Member equity.
Some of your loan agreements are due on May 15, 2020. I have heard from two investors that they will not be converting their 16% loan to an 18% IRR equity stake in one of the projects. We will return the loan principal and interest through the end of June to those folks.
All of you will be receiving a separate email with the current Operating Agreements for both projects and the current proformas and projected 10 year cash flows. Included with the email will be a document for you to execute indicating which project you may want to convert your current loan principal and earned interest into an equity investment, or if you would prefer to have your loan principal and earned interest paid out on the maturity date of your promissory note. With the reality of the pandemic, I am no longer traveling to teach in-person classes in Incremental Development. I am concentrating my time and attention on our local projects here in East Point and South Atlanta. I am pretty easy to reach by email, video, or phone if you would like to discuss the conversion to equity or return of principal and interest.
Eleanor and I are executing a joint venture agreement with Joel Dixon and Oasis Urban Development to help with the work of development and construction. Some of you may know Joel from his work as a faculty member with the Incremental Development Alliance (IncDev). We continue to move forward despite bumps in the road with the city going to Zoom meetings and limiting access to senior staff and despite the pandemic's impact on local bank lending. The relationship with the Reinvestment Fund as our construction lender is very promising, as their mission is completely aligned with our efforts here in East Point. We will pursue an Industrial Revenue Bond for the construction on the former VW property, but our lender at the Redevelopment Fund will be providing us with a term sheet for that project for us to compare with the prospect of a 10 year interest only bond issue.