Obsidian Ignores My Offer

My offer to buy the building I work in has been ignored too!

By Summit 1031 Bankruptcy

May 2009

I have made a very professional, reasonable and competent offer to purchase the principals’ interest in the commercial building I run and operate a CPA firm from in downtown Bend. I originally purchased 16.67% of this building in 2004. My dad wanted me to start acquiring real estate investments. I could only afford to purchase 16.67%. My business partner, [name and last name omitted], purchased 16.67%, a local realtor purchased 10%, and Dad, Brian, & Tim purchased the remaining interest. No money was used from Summit or Inland to purchase this property.

We have two vacancies and all leases are short-term or coming up. If we don’t lower the rents to match the market, we will not get tenants. By lowering the rents, we are in a negative cash flow position. I have to cover this shortage because none of the other members have money or interest in purchasing the building. In February, I made a required capital call to help cover the shortfall, but only [name and last name omitted] and I deposited money. The other members did not. This resulted in a cessation event according to our operating agreement. In this case, either [name omitted] or I could purchase the building for 80% of the appraised value. This would be less than the debt. [Name omitted] does not want to purchase the building, but I do. I am offering 100% of the value in order to help get some cash to the exchangers.

Click here to see the details of this offer [ http://www.summit1031bkjustice.com/wp-content/uploads/2009/05/exhibit-f3-klondike-offer.pdf ]

Why don’t I get any response?

My business is the anchor tenant. If I move my business, there will be an even greater negative cash flow. I don’t want to move my business, but since there are many other deals out there that aren’t caught up in the Summit 1031 Bankruptcy, I am beginning to think I should move on.

If I leave, I am pretty sure the property will go into foreclosure since I am and have always been the one managing the tenants and property, accounting and administrating the LLC. Since my business is a tenant, the building is considered owner occupied for financing purposes. We all know how difficult financing is now. Owner occupied financing is more favorable, of course. Banks are going to have to start demanding pay downs on their loans if the income is not producing 1.25 to 1.3 times the principal and interest payments. The banks need to follow these federal guidelines or they will be fined. Now that the banks have more residential properties than they ever wanted, they will have to start taking commercial properties.

The more Obsidian continues to delay these offers, the less these properties will be worth. Other properties will be more attractive to buyers like me. Padrick says the assets of the estate needed to be transferred because it is a “melting ice cube”. I’m not exactly sure what this means, but he uses the term all the time. If it means the value of the estate is decreasing, it is only because Obsidian and company has spent more time getting control and charging fees, than paying the exchangers back.

You already have less value because my LLC had to pay $20K for legal representation with no results. The legal system appears to only work to pay the attorneys, not to protect our rights. All the parties involved have legal rights, but none of those rights are going to be enough to get money to the exchangers. I am naive; I don’t understand how you can look to the legal system for help, but then end up beat up, poor, and no one has won except the attorneys.