Posted by John Merchant,JD,EMS on March 25, 2002 at 11:40:23:
In Reply to: Is There a Market for Green Notes? posted by James Balis on March 24, 2002 at 20:54:10:
By "green" notes, I presume you mean new owner's carryback notes will be created at sales of various properties.
"I have an opportunity to broker newly created first position green notes (on assorted property types) where the owner understands that such notes would be discounted more than "seasoned" notes. My question is, how much of a market is there for green notes in New York City if the yield is favorable?"
Yes, there's a "ready" market for such notes, assuming all elements are in line and reasonable...credit, down payment, provable value of the realty, etc.
"What would a favorable yield be for such notes (providing that all other criteria were met)?"
I doubt if any note buyer is going to be willing to give you a blanket figure on the yield he wants. This always depends on ALL the factors and may not be same for any two of your notes.
" In all instances the LTV would be favorable (or I wouldn't even consider it). Is this worth pursuing?"
There's a market out there for these, may or may not be buyers in NYC itself, but that's irrelevant I'd say. Who cares where the buyers are?
I think you'd do well to read a little paper I wrote some months back on the elements to consider when creating a carryback note...I'd attach it but don't see a ready mechanism here, so I'll refer you to the Articles at bottom of home page on www.ree.com. Look for the article by me down in the list of articles on that site.
I believe the article will be of value to you, telling you the things to be aware of when you're helping the seller create his notes...such as a decent down payment. Zero down payments aren't going to help him.
And the buyer's credit...if it's shabby, experienced note buyers aren't going to be too excited about their notes.
When these notes are ready to sell, I'd like a shot at buying them. If you've followed good practices in their creation they'll definitely have some value.