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Harmony @ 1 Financial Status Update

Big Banker reports on Harmony @ 1 finances: "As of the close of business Friday, August 28, there were no recorded liens or notice of default. First loan, $5 million. Second loan, $5.6 million. On February 17, 2015, a strange deed of trust was recorded by Sonora Shores in favor of Urban Land, a performance deed of trust, which normally means there is some kind of equity share agreement between Sonora Shores and Urban Land, a specific performance action that takes place when lots sell. The only items filed and recorded were the Declaration of Convents, Conditions, and Restrictions (CCR); and a subordination agreement on July 29, 2015 regarding the CCRs."

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Most of the property is designated as Open Space Residential, which requires a minimum of 5 acres per house; the rest is Very Low Density Residential, which requires 1/2 to 5 acres. In addition, it's in the Hillside Preservation District, which limits the site coverage to 6 acres. This restricts the development to the approved 12 units, and I believe it would require a General Plan amendment to change that.

Sonora Shores purchased the property on April 30, 2014. It pulled out one loan for $5,325,000, then the next recorded document is a second loan for $5,600,000. Then on December 8, 2016 it took out an additional loan for $9,062,000.

So what I see recorded on the property looks like it has three loans.

1st: $5,325,000

2nd: $5,600,000

3rd: $9,062,000

It looks like all three of the loans are currently on the property because subordination agreements have been recorded.

Three loans on a construction project and development project with only one sold lot is extremely rare.

Intro to Real Estate: Play only with other people's money.

Peter, not always. Some developers have very deep pockets and pay cash for every property they purchase. Friends of mine purchased a property with more than $18,000,000 of debt for $5,300,000 in cash the other day.

Our mutual friend Don Peebles also has very deep pockets.

Some developers are a cluster fart and can't finance enough money to buy postage stamps.

Likely scenario. It's interesting to me that a Canadian company is operating a U.S.-based LLC. The taxes are not friendly in Canada because it is taxed as a corporation and they can't pass them through as we do in the U.S. I seriously wonder how they can turn this around without volume housing up there. That's already zoned residential, so it's entirely up to the Planning Commission?

"Instead we'd like to build 112 homes on 5,000-square-foot lots."
Or 1,200 condos.

Intro to Real Estate: Play only with other people's money.

Legalized Gambling 101 (supplemental course to Intro to Real Estate): Play only with the money you can afford to lose.

It appears that only a single Harmony@1 lot has sold as of this week.

I suspect that at some point in the future we'll see the new owner in front of the Planning Commission stating: "Now that we've irreversibly built roads on the hillside, we can't make this project profitable with just 10 homes. Instead we'd like to build 112 homes on 5,000-square-foot lots."

Big Banker says he will get back to you tomorrow.

Thanks for the update on this, Big Banker. I've been wondering what's been doing up there lately.

Am I reading correctly that ~$27 million in loans have been taken out so far with the sale of only one lot to show for it? If so, yikes.

I'll echo Britt's request -- can you put this all into context?

BB: Can you speculate to the rest of us non-finance/real estate people what that could mean?

In December 2016, Sonora Shores took out an additional $9,062,000. It doesn't look like any of the previous debt was retired. Also, only one lot has sold as of close of business on Friday, March 17.

This Riptide story is again relevant RE: the $7.5M in new financing Sonora Shores recently acquired:

http://www.pacifica.city/forms/PAC_H1_finance75_031016_watermark.pdf

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