For several months, together and separately, we held countless calls and quite a few joint trips to meetings with bankers, funds and other financing sources in the country, and now we are reaching the end point. We are sitting in a café in a foreign city that in recent months has become almost our home. The client looks tired and frustrated.
“How can this be? What am I missing here?” he asks for who knows which time.
I sit across from him and say nothing.
In less than a week is the date for signing the contract to purchase the property (the shell of an apartment building from a local contractor who fell into distress), and no financial source is willing to provide financing.
More than once I tried to explain to him that his course of action was mistaken, that without equity he would not manage to put the deal together, but he insisted and kept spending money on pointless trips and meetings.
The presale to friends and family yielded a few sales, and there is money in the escrow account I opened, but it won't be enough.
Some of the outside financing sources weren't interested in the project, and the others set financing terms or interest rates that sank the deal. My attempts and his to bring in an investor alongside him on the deal also failed. And now he faces a broken trough.
Unfortunately, this deal did not go ahead.
The developer, despite attempts until the last moment, failed to raise the capital required for the purchase.
The extension I managed to obtain from the seller also didn't help, nor did the attempts to persuade the seller to bring my client in as a partner, so that my client would arrange the spreading and payment of the debts that had accumulated on the property and would continue the construction from there.
Yes, not every deal goes ahead.
I've seen quite a few such deals over the years.
What characterized a fair number of them was the developer's unwillingness to acknowledge that equity is required to carry out the deal, and his attempts to enter a deal relying on other people's money.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית