On November 13, 2024 John received an email from Michael Schaefer of FH. I was copied on the email.
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Schaefer informed us that our mortgage loan had been transferred to the Special Asset Group*("SAG")*. We were further informed that FH still had not received the appraisal they had requisitioned, more than seven months after learning of the land sale transaction. FH consistently rebuffed our repeated requests between Nov. 19 and December 3 for issuance of FH's consent to a revised land sale transaction by insisting that they had not yet had a chance to review the appraisal they acknowledged receiving on November 18.
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​I emailed Schaefer the next morning (Nov. 14) stating "it is imperative that we speak today." Schaefer indicated by email he was available for a phone call. John and I called ten minutes later.
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John began the call by inquiring as to why our loan had been transferred to the "special asset group" and what is a special asset group anyway? Schaefer unhesitatingly replied that the loan was transferred to SAG because of concerns over GPLLC's debt service coverage ratio ("DSCR"). I pointed out that FH had waived any alleged DSCR violation for 2023 just four weeks before. Schaefer said FH had concerns about GPLLC's 2024 DSCR. I replied that FH had never in 12 years mentioned the phrase "debt service coverage ratio" except to issue to GPLLC unsolicited waivers of alleged DSCR violations. I noted that it struck us as odd that these DSCR issues and the transfer of our loan to SAG occurred just two days before our land deal would die because FH had not managed in seven months to get an appraisal.
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The conversation then turned to the tardy appraisal. Schaefer said he was not expecting the appraisal to be done until the end of November. I acidly replied that I had been in contact with the appraiser and was aware that FH had been informed they could expect delivery of the appraisal on Monday or Tuesday of the following week, just four days hence and well before the end of the month. (In fact, I confirmed with Schaefer on Tuesday, Nov. 19 that FH had received the appraisal on Monday afternoon). Schaefer, with a shamelessness and sense of impunity that typified FH's comportment throughout this entire episode, simply ignored my insinuation that he'd lied to us about the delivery date for the appraisal.
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FH's unalloyed bad faith having been established to John's and my satisfaction, we cashed out of the swap transaction on November 19. We received a pay out of $311,600. We also began making plans to pay the mortgage loan in full.
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After confirming on Nov. 19 that FH was indeed in receipt of the appraisal, I continued to urge Schaefer to review the appraisal as soon as possible because my broker believed the outparcel purchaser could be brought back to the table if FH were willing to offer any assurance that their decision on the consent was forthcoming. Between November 19 and December 3 I repeatedly contacted Schaefer to suggest that the outparcel transaction might be resurrected and we would need FH's consent as soon as possible. This series of emails is most remarkable insofar as Schaefer unabashedly invokes the appraisal at each turn and states that he still had not had the opportunity to review the appraisal.
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November 19. After FH failed to deliver its consent by the November 15 deadline I informed Schaefer on November 19 that my broker believed the outparcel purchaser would accept FH's assurance that its decision on the consent was imminent, and on that basis would not terminate the contract. Schaefer replied that he could not offer any assurances because FH had not yet reviewed the appraisal.
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November 27. After the outparcel purchaser terminated the contract on November 20, my broker reached out to the purchaser and discussed resurrecting the deal at a reduced purchase price of $875,000. When I informed Schaefer of this on November 27 he replied that he still had not reviewed the appraisal.
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December 3. I contacted Schaefer again on December 3 and informed him that the land deal was dead for want of any assurances from FH regarding its consent. I proposed yet another transaction, a much simpler transaction because no land deal or third-party was involved. GPLLC offered to prepay the loan out-of-pocket in an amount equal to whatever appraised value FH attributed to the undeveloped outparcel, whereupon FH would release the lien on the outparcel. In effect I was telling Schaefer forget the appraisal, just give me a number, any number, for the appraised value of the outparcel and I'll prepay the loan in that amount in exchange for release of the outparcel.
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Schaefer replied to my last proposal by again stating that he couldn't discuss the proposal until he'd reviewed the appraisal.
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I emailed Schaefer on Thursday, Dec. 5, as follows:
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I have a sneaking suspicion I could walk into your office and place $1 million in cash on your desk and you'd refuse to accept it until you'd appraised the cash. Message received.
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We're paying the note in full tomorrow. Get the papers ready. Need payoff figure ASAP.
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GPLLC paid the mortgage note in full on Friday, Dec. 6. The pay off figure was $6.552 million. GPLLC intends to transfer its banking to another bank as soon as possible so that we may sever all ties with FH.
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* I momentarily took heart in the transfer of the loan to SAG, reasoning that any special asset or workout group would have to leap at the opportunity to convert dirt collateral to $1 million in cash that would be immediately applied to pay down the loan, thereby substantially reducing FH's exposure to a "distressed" borrower. The patent absurdity of FH's bad faith rejection of the land sale contract is discussed further here.