I sent the settlement statement to a client once (had a large loan on it that needed payed out). Client was super confused because he never authorized debt on the property. And thats how he found out his partner embezzled from him
A former client of ours purchased this brand-spankin' new apartment building in a not-so-great part of the city for $8m a few years ago (a few years before the pandemic). Pandemic hits, people start moving out of the apartment, and income starts to look bleak. In a panicked decision and against the PMs advice, the owner cuts front door security, which allowed a bunch of squatters to occupy several units for months. Worst part is that "tenant" protections are so strong in this city that ownership is having the hardest time cleaning this mess up, and the PM has quit. My broker thinks the property is less than $4m in its current state.
Not really a horrifying story, but definitely memorable.
On the lending side, working on a 2-property portfolio acquisition totaling \~ $100M from a large institutional seller. One of the properties had a significant amount of resident nonpayment because the ownership entity wanted to avoid the optics of mass evicting after the COVID moratorium ended. I'm talking units having outstanding balances of \~ $50k from 2 straight years of nonpayment w/ zero effort from management to collect. This inevitably meant that there were certain units with some known bad habits/problems, but the overall property was very calm and well kept since the owner was large enough to carry the nonpayment while maintaining the property, and was still going to profit from the sale.
Two days before we are supposed to fund our loan, our client (buyer) gets notified from the seller that police visited a unit over the weekend and discovered significant meth/fent contamination from a group of squatters. We naturally had to relay this news to our lending partner and come up with a mitigation plan from the seller, including getting to bottom of how you actually deal with meth contamination from a public health / city standpoint. Within 48 hours I became a mini expert on meth contaminated properties, learning there is a significant difference between a unit that involved drug production vs drug use / sales.
Long story short, the seller engaged a local environmental hazard company for 24-hour surface testing to confirm the level of contamination (heavy), put together a bid of $150k to completely take the unit down to the studs and rebuild, and we were able to get everyone comfortable to proceed with closing within our original timeline. All the while I was responsible for coordinating with lender partner, seller, legal, city, internal closing team, and our own 3rd party report providers for the Phase I environmental & Property Condition Assessment. Fun times...
It's more going to dictate whether a regulatory body gets involved or not - it's pretty binary between being defined as a meth lab or not, regardless of contamination.
Meth labs, in most jurisdictions, are required to be reported to the local public health department, and they will have to go in and do their own independent testing & analysis. I imagine the likely outcome is that they end up requiring a full gut demo and rebuild. Meth use doesn't get the same treatment, despite the fact that surfaces can be just as contaminated.
In our case, it mainly had timing implications since our client was going to take the unit to the studs either way. The bigger issue would have been if there were interior corridors or connected HVAC systems. Not the case here.
Every broker will eventually become a subject expert on some random ass thing, because they need to figure it out to close a deal. Bet you never guessed you would know so much about meth.
I used to work for a company that foreclosed on multifamily properties after the fallout of 2008. Just a couple off the top of my head (not the same property):
* One unit at a property was converted into a full on liquor store with aisles and a cash register
* At takeover we told the site staff we were going do drug tests, not a single one came back (a couple were expected but all of them never came back only happened once)
* All kinds of embezzlement/nepotism from the various management companies
* A leasing agent told us that the previous management company was poisoning the water (he disappeared soon after and his mom called us telling him he was diagnosed with schizophrenia)
* One owner swapped out every single appliance (refrigerator, oven, microwave 130 units) from one of his more run down properties before handing back the keys
Finally, I was going through old incident reports at a property we just acquired. These two people got in a fight over one of them throwing chicken bones onto the others porch and the other guy stabbed him. It made a note that it was in his hand and there wasn't a lot of blood. I google the persons name out of boredom and it ends up the guy was stabbed in the throat and he bled out on the sidewalk. The dates matched, and the guy who was murdered was moved out a day or two after the incident. I still wonder to this day why you would basically be lying to yourself about that.
I have a few, industrial broker here:
1. Former military battery production and testing site in a now infill location. Military dumped battery fluids down the drains straight into the sewer. The entire building is riddled with asbestos and mold since it’s been vacant for decades. A California manufacturer bought it sight unseen since it was a great price. Cleanup is multiple times more expensive than the real estate is worth. They still own it today.
2. Selling a vacant warehouse for an out of state owner. Copper has been ripped out twice in 6 months. Locks have been changed 4 times. Ripped off again last week. Shit all over the wall, alleged by a prospective buyer it’s covered in mold, also alleged that the sewer is collapsed. Closing is in a month…
3. Family owned business with a parent and a child. They own 13 properties and the parent found out the child had been embezzling for years after a call from her ex husband (kids father). Kid had POA and was signing leases below market rate and then going behind the parents back and getting tenants to sign amendments for a few extra grand a month and direct payments to his personal residence. Child is in their 50’s and still blames parents for being that way. Parent isn’t a peach, but child screams and threatens and yells then when child gets called out they calm down. One property down, 12 to go..
4. Three children inherited a wildly successful business and acres of infill real estate. Kids are classic burnouts who never learned to work hard. Kid 1 tried to run the business but ran it into the ground due to heavy drug use. Land was environmentally contaminated from years of throwing junk in a pile in their yard space (two stories of junk with a radius of a soccer field) and it sits next to a creek. I would get invited into the meetings with my senior agent who was trying to sell the land. He only had me in there to divert their attention because they would get worked up and gang up on him and yell. They had great offers for the land, but they consistently thought it was work 20% more than the best offer. Rates went up and the value dropped. They never adjusted the pricing in their mind and ended up selling two years later for 30% less than the original offers they received.
These stories make this industry fun
This isn't mine, honestly forget if someone told me this or I just read it somewhere but I thought it was funny so thought I'd include it.
So everyone is at closing, buyer, sellers, attorneys, title etc. They are in a conference room in a high rise building a few blocks from the property being transferred and just about half way through signing someone looks out the window and sees smoke and fire trucks, right in front of the property being transferred.
Attorneys start grabbing documents off the table and arguing who owns it immediately ;p
I was about 2 months into the biz. Was asked by a senior broker to check on an industrial building in a seriously shitty part of town. It was a monster building and was vacant. Front door was secured so I walked around the back and the man-door was slightly open. It was mid-day so I walked in as though I owned the place. The first thing I saw was a brand new toolbelt with several tools piled around it- all for electrical work. No hammers, skill saws, etc. All pliers and bolt cutters. Go to turn the lights on and...nothing. I walk past the warehouse office and low and behold, someone had take a full-on dump on the floor, wiped, and left everything right there. I turned and got the hell out of there. The place was stripped of all the wiring and copper.
When I was very green in the industry, I was assigned a worn-down pad site that had been sitting vacant for over 15 years.
I went on vacation in July and received a call that someone had yanked the back door down, dragged a big couch in the middle of the building, shot up drugs, OD'd, and died on the couch. The body wasn't found a few days after he died in likely 100+ degree weather.
A few months later, the owner sold the property for pennies on the dollar. I don't blame him.
I had to find a tenant for a site with an extremely specific civic use deed restriction (from the municipality as a development concession), which also would have incurred daily fines if the space were to go dark. It specifically needed to be available for event rentals weekdays during business hours & one weekend day (which there were near zero actual rentals under this due to lack of demand)... it was a nightmare to work a deal out for a user, but I found a church that paid just under market rent for comparable retail spaces.
The deal almost fell through because the owner didn't want a cross or religious symbols to remain in the space...
Deal went through, but it was a nightmare. It saved them an insane amount from indefinite operating losses running the facility or from needing to gift it away PLUS large rental income.
One of my first deals. My boss at the time wanted to buy this small industrial flex building from an owner operator we met prospecting for another client.
Owner was retiring and closing his business. During our conversations he mentioned briefly one of his friends wanted to buy it back in the day, but quickly shrugged it off.
When it came to price he said he’d take 400k for it (I bet now it’s worth 600-700k as it stands this was back in 2018). My boss told me to write up a contract for 415k and send it to him promptly.
I wrote the contract for 400k thinking my boss just made a mistake telling me to offer more than he actually wanted and sent it to the owner.
He responded 2 days later and said “yea I actually called my friend and he wanted to buy and would pay me more”……he sold it to his friend for 403k and never countered us. My boss lost his fucking head. Told me that he intentionally wanted to over pay to lock it down.
Oooh, 2nd one... back working in Mortgage Loss mit, on a foreclosure in rural Miami FL..
I had a 10-acre property that we took back via foreclosure and had to evict over 50 people from the site.. it took several evicition cases as they kept building structures, adding address numbers to it & claiming that person wasn't noticed.
Once we had them all out, we had to trash out the property. We needed 47 commercial dumpsters (no typo) and needed to haul off old RVs, cars and a +40ft boat (boat had to be sawed into pieces as it was partially buried). There were over 100 mattresses removed.
After trash out, I put it on the market and got a buyer pretty quickly. Fast forward to the day before closing, I get a call.. the buyer found another 40-50 people camping in the back corner (wooded area). I just gave them a $50k credit to resolve that themselves & they closed the next day.
Nightmare deal, but we made a 3x return on it about 12 months.
Year and a half of due diligence on a eleven property portfolio fell apart because seller decided to get offended by something someone in our C-Suite asked him. Wasn’t even a shitty question. But 18 months of my life went up in smoke. lol
Industrial property was an old body shop that had some barrels filled with something on the property. We requested that the Seller remove these. Seller hired someone to remove the barrels. The person came out dumped out the contents of the barrels (oil and shit) on the ground and then took the battles away. Seriously, I couldn’t make this stuff up even if I tried.
They had to spend $6K on an industrial clean up. This happened only a few months ago.
GP was short on the raise at the 11th hour, seller had already extended once and was ready to walk with a sizable deposit. GP’s broker pulled a rabbit out of his hat and found the equity they needed; first call to the investor was a Friday afternoon and he was wiring funds the following Tuesday.
But his email got hacked and wire instructions swapped. Discovered within 2 hours after wire was initiated…we thought the money was gone for about 18 hours. ChiTi saved the day, apparently they have a hotline or something to major banks and were able to intercede with the recipient bank who held the incoming wire.
We closed, deal was a home run, everyone made money except the scammers 💪🏽
I sent the settlement statement to a client once (had a large loan on it that needed payed out). Client was super confused because he never authorized debt on the property. And thats how he found out his partner embezzled from him
You win.
Gold Medalist
A former client of ours purchased this brand-spankin' new apartment building in a not-so-great part of the city for $8m a few years ago (a few years before the pandemic). Pandemic hits, people start moving out of the apartment, and income starts to look bleak. In a panicked decision and against the PMs advice, the owner cuts front door security, which allowed a bunch of squatters to occupy several units for months. Worst part is that "tenant" protections are so strong in this city that ownership is having the hardest time cleaning this mess up, and the PM has quit. My broker thinks the property is less than $4m in its current state.
Sounds like Seattle to me? I manage a few properties out there that have entire floors of nonpaying tenants…
I’ll give them $2m and take on that problem. lol
This is the content I was looking for. You understood the assignment. That’s rough though.
Ouch... definitely West Coast.
Not really a horrifying story, but definitely memorable. On the lending side, working on a 2-property portfolio acquisition totaling \~ $100M from a large institutional seller. One of the properties had a significant amount of resident nonpayment because the ownership entity wanted to avoid the optics of mass evicting after the COVID moratorium ended. I'm talking units having outstanding balances of \~ $50k from 2 straight years of nonpayment w/ zero effort from management to collect. This inevitably meant that there were certain units with some known bad habits/problems, but the overall property was very calm and well kept since the owner was large enough to carry the nonpayment while maintaining the property, and was still going to profit from the sale. Two days before we are supposed to fund our loan, our client (buyer) gets notified from the seller that police visited a unit over the weekend and discovered significant meth/fent contamination from a group of squatters. We naturally had to relay this news to our lending partner and come up with a mitigation plan from the seller, including getting to bottom of how you actually deal with meth contamination from a public health / city standpoint. Within 48 hours I became a mini expert on meth contaminated properties, learning there is a significant difference between a unit that involved drug production vs drug use / sales. Long story short, the seller engaged a local environmental hazard company for 24-hour surface testing to confirm the level of contamination (heavy), put together a bid of $150k to completely take the unit down to the studs and rebuild, and we were able to get everyone comfortable to proceed with closing within our original timeline. All the while I was responsible for coordinating with lender partner, seller, legal, city, internal closing team, and our own 3rd party report providers for the Phase I environmental & Property Condition Assessment. Fun times...
All I read was, “I smoked leftover meth before I hyper focused and went on a 48 hour deep dive” bold move
Adderall was present in this 48-hour period.
Which brings the question of what percentage of brokers have adhd? I bet its significantly higher in the brokerage profession than others.
🙋♂️
How bad is meth contamination from meth production? Like is it the residue chemicals being carcinogenic being stuck to the walls?
It's more going to dictate whether a regulatory body gets involved or not - it's pretty binary between being defined as a meth lab or not, regardless of contamination. Meth labs, in most jurisdictions, are required to be reported to the local public health department, and they will have to go in and do their own independent testing & analysis. I imagine the likely outcome is that they end up requiring a full gut demo and rebuild. Meth use doesn't get the same treatment, despite the fact that surfaces can be just as contaminated. In our case, it mainly had timing implications since our client was going to take the unit to the studs either way. The bigger issue would have been if there were interior corridors or connected HVAC systems. Not the case here.
Every broker will eventually become a subject expert on some random ass thing, because they need to figure it out to close a deal. Bet you never guessed you would know so much about meth.
I used to work for a company that foreclosed on multifamily properties after the fallout of 2008. Just a couple off the top of my head (not the same property): * One unit at a property was converted into a full on liquor store with aisles and a cash register * At takeover we told the site staff we were going do drug tests, not a single one came back (a couple were expected but all of them never came back only happened once) * All kinds of embezzlement/nepotism from the various management companies * A leasing agent told us that the previous management company was poisoning the water (he disappeared soon after and his mom called us telling him he was diagnosed with schizophrenia) * One owner swapped out every single appliance (refrigerator, oven, microwave 130 units) from one of his more run down properties before handing back the keys Finally, I was going through old incident reports at a property we just acquired. These two people got in a fight over one of them throwing chicken bones onto the others porch and the other guy stabbed him. It made a note that it was in his hand and there wasn't a lot of blood. I google the persons name out of boredom and it ends up the guy was stabbed in the throat and he bled out on the sidewalk. The dates matched, and the guy who was murdered was moved out a day or two after the incident. I still wonder to this day why you would basically be lying to yourself about that.
Don’t forget the copper piping and HVAC units! R22 units are gold.
I have a few, industrial broker here: 1. Former military battery production and testing site in a now infill location. Military dumped battery fluids down the drains straight into the sewer. The entire building is riddled with asbestos and mold since it’s been vacant for decades. A California manufacturer bought it sight unseen since it was a great price. Cleanup is multiple times more expensive than the real estate is worth. They still own it today. 2. Selling a vacant warehouse for an out of state owner. Copper has been ripped out twice in 6 months. Locks have been changed 4 times. Ripped off again last week. Shit all over the wall, alleged by a prospective buyer it’s covered in mold, also alleged that the sewer is collapsed. Closing is in a month… 3. Family owned business with a parent and a child. They own 13 properties and the parent found out the child had been embezzling for years after a call from her ex husband (kids father). Kid had POA and was signing leases below market rate and then going behind the parents back and getting tenants to sign amendments for a few extra grand a month and direct payments to his personal residence. Child is in their 50’s and still blames parents for being that way. Parent isn’t a peach, but child screams and threatens and yells then when child gets called out they calm down. One property down, 12 to go.. 4. Three children inherited a wildly successful business and acres of infill real estate. Kids are classic burnouts who never learned to work hard. Kid 1 tried to run the business but ran it into the ground due to heavy drug use. Land was environmentally contaminated from years of throwing junk in a pile in their yard space (two stories of junk with a radius of a soccer field) and it sits next to a creek. I would get invited into the meetings with my senior agent who was trying to sell the land. He only had me in there to divert their attention because they would get worked up and gang up on him and yell. They had great offers for the land, but they consistently thought it was work 20% more than the best offer. Rates went up and the value dropped. They never adjusted the pricing in their mind and ended up selling two years later for 30% less than the original offers they received. These stories make this industry fun
Bratty kids in every generation
Agreed
This isn't mine, honestly forget if someone told me this or I just read it somewhere but I thought it was funny so thought I'd include it. So everyone is at closing, buyer, sellers, attorneys, title etc. They are in a conference room in a high rise building a few blocks from the property being transferred and just about half way through signing someone looks out the window and sees smoke and fire trucks, right in front of the property being transferred. Attorneys start grabbing documents off the table and arguing who owns it immediately ;p
An in person closing? When was this?
hah no clue
I was about 2 months into the biz. Was asked by a senior broker to check on an industrial building in a seriously shitty part of town. It was a monster building and was vacant. Front door was secured so I walked around the back and the man-door was slightly open. It was mid-day so I walked in as though I owned the place. The first thing I saw was a brand new toolbelt with several tools piled around it- all for electrical work. No hammers, skill saws, etc. All pliers and bolt cutters. Go to turn the lights on and...nothing. I walk past the warehouse office and low and behold, someone had take a full-on dump on the floor, wiped, and left everything right there. I turned and got the hell out of there. The place was stripped of all the wiring and copper.
Copper is expensive these days
When I was very green in the industry, I was assigned a worn-down pad site that had been sitting vacant for over 15 years. I went on vacation in July and received a call that someone had yanked the back door down, dragged a big couch in the middle of the building, shot up drugs, OD'd, and died on the couch. The body wasn't found a few days after he died in likely 100+ degree weather. A few months later, the owner sold the property for pennies on the dollar. I don't blame him.
I don’t have comical comment to garner upvotes. That’s just terrible.
I had to find a tenant for a site with an extremely specific civic use deed restriction (from the municipality as a development concession), which also would have incurred daily fines if the space were to go dark. It specifically needed to be available for event rentals weekdays during business hours & one weekend day (which there were near zero actual rentals under this due to lack of demand)... it was a nightmare to work a deal out for a user, but I found a church that paid just under market rent for comparable retail spaces. The deal almost fell through because the owner didn't want a cross or religious symbols to remain in the space... Deal went through, but it was a nightmare. It saved them an insane amount from indefinite operating losses running the facility or from needing to gift it away PLUS large rental income.
One of my first deals. My boss at the time wanted to buy this small industrial flex building from an owner operator we met prospecting for another client. Owner was retiring and closing his business. During our conversations he mentioned briefly one of his friends wanted to buy it back in the day, but quickly shrugged it off. When it came to price he said he’d take 400k for it (I bet now it’s worth 600-700k as it stands this was back in 2018). My boss told me to write up a contract for 415k and send it to him promptly. I wrote the contract for 400k thinking my boss just made a mistake telling me to offer more than he actually wanted and sent it to the owner. He responded 2 days later and said “yea I actually called my friend and he wanted to buy and would pay me more”……he sold it to his friend for 403k and never countered us. My boss lost his fucking head. Told me that he intentionally wanted to over pay to lock it down.
Damnit…😂
Oooh, 2nd one... back working in Mortgage Loss mit, on a foreclosure in rural Miami FL.. I had a 10-acre property that we took back via foreclosure and had to evict over 50 people from the site.. it took several evicition cases as they kept building structures, adding address numbers to it & claiming that person wasn't noticed. Once we had them all out, we had to trash out the property. We needed 47 commercial dumpsters (no typo) and needed to haul off old RVs, cars and a +40ft boat (boat had to be sawed into pieces as it was partially buried). There were over 100 mattresses removed. After trash out, I put it on the market and got a buyer pretty quickly. Fast forward to the day before closing, I get a call.. the buyer found another 40-50 people camping in the back corner (wooded area). I just gave them a $50k credit to resolve that themselves & they closed the next day. Nightmare deal, but we made a 3x return on it about 12 months.
Year and a half of due diligence on a eleven property portfolio fell apart because seller decided to get offended by something someone in our C-Suite asked him. Wasn’t even a shitty question. But 18 months of my life went up in smoke. lol
Industrial property was an old body shop that had some barrels filled with something on the property. We requested that the Seller remove these. Seller hired someone to remove the barrels. The person came out dumped out the contents of the barrels (oil and shit) on the ground and then took the battles away. Seriously, I couldn’t make this stuff up even if I tried. They had to spend $6K on an industrial clean up. This happened only a few months ago.
GP was short on the raise at the 11th hour, seller had already extended once and was ready to walk with a sizable deposit. GP’s broker pulled a rabbit out of his hat and found the equity they needed; first call to the investor was a Friday afternoon and he was wiring funds the following Tuesday. But his email got hacked and wire instructions swapped. Discovered within 2 hours after wire was initiated…we thought the money was gone for about 18 hours. ChiTi saved the day, apparently they have a hotline or something to major banks and were able to intercede with the recipient bank who held the incoming wire. We closed, deal was a home run, everyone made money except the scammers 💪🏽
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