The Rule is . . . There are No Rules
By Lloyd R. Adams
This is a true story that might inspire you by helping others and at the same time fulfill your own dream to enjoy financial freedom for the rest of your life.
In 1986, shortly after securing a 100% financed small business loan with the local community bank who handled the deposits for my newly acquired not so big newspaper chain that had supported me as an employee for 14 years, I was offered the privilege to become a member of their board of directors. This opportunity allowed me to learn and digest firsthand this financial institution’s inner workings.
As the new owner and President of my own corporation, it became evident I needed larger quarters to fulfill my business plan for further expansion. As a board member, I was privy to all early stage commercial bankruptcy filings in my geographic area.
One business in particular was going through foreclosure proceedings. It had become a bank owned automotive dealership. Although the actual license to sell Ford trucks and cars was outside the realm of the bank’s protocol, the real estate and its commercial buildings were the only collateral the bank had been able to retail from its corporate borrower.
I was looking diligently for commercial property to expand my business and this property looked like a perfect fit. With some modifications to the auto service bay area there might be sufficient space to house a printing press.
I went into action and negotiated a deal to purchase the property directly from the bank which had successfully become the owner of record. It carried a very attractive purchase price but with certain monetary restrictions.
Because it was considered a distressed property and the bank had not fully recouped its losses as the main receivership of the bankruptcy, they required me to finance its purchase price through their bank. They also demanded a minimum of a five year guarantee that I could not sell the property. When I agreed to these terms with some other not so notable contingencies the property became mine.
The previous owner, now recovering from his corporate bankruptcy used his dealership license to find another location which became a rental agreement with his very successful country club friend who owned and operated a GMC dealership in the same small town. Behind closed doors they figured a way to enhance each of their respective dealerships.
The GMC dealership owner had recently secured a small Subaru dealership license from an old friend, Ernie Bock who had visited Japan and acquired the entire North American franchise distributorship known as Subaru America. A separate place was required because General Motors would not allow a secondary dealership in the same physical location as its own. This is when I entered the picture.
I had owned the building for less than 2 weeks. I had just hired an architect from Goss Printing to come from Philadelphia to assess my building and come up with a blue print to convert the auto service bay into a full blown printing facility for my weekly Pennysaver publications. The existing front office space with some minor alterations would accommodate my in-house and outside sales force, business administration, and production staff.
The 10 car lifts in that auto service area had not been removed. The reception area, sales offices and parts department were still in place. The only change from the previous business operation was the large sign at the front of the huge automotive lot which had been removed.
I had entered into negotiations with a radio station that was located on an adjacent lot. One of the large antenna anchor guide wire post was found to be inside my property line upon review of the plot plan and survey which had been necessary to complete my purchase transaction with the bank. He was apparently aware of the situation prior to my purchase because just 4 days after signing my mortgage documents I received an offer from the radio station owner. He wanted to purchase approximately 10,000 square feet of land behind the building which had been used for used car overflow inventory storage.
A preliminary acceptance of his offer to purchase it had been given to him by me at a price that would have reduced my mortgage by approximately 25%. Of course, it was contingent upon bank approval to release this portion from my mortgage contingencies.
Things were moving very rapidly. In just 14 days I had purchased the property, made plans to convert it into my headquarters, had accepted an offer to sell off a small portion of land which I did not need, and then to add to the complexity a new wrinkle entered into the picture.
The owner who was my largest weekly advertiser contacted me with an offer I couldn’t possibly refuse. His GMC dealership advertising budget accounted for 8% of my entire gross revenue from my largest Pennysaver zone of individual publications. I know instinctively that I had better do whatever I could to keep him satisfied.
If I ruffled his feathers and he decided to discontinue his advertising with me, it would not only reduce my income from his account but potentially snowball into a backlash that could affect my entire automotive advertising base.
His business was my newspaper anchor of all its automotive advertisers that could be compared to a flag ship store in a shopping mall. If the main store pulls out, all the other stores would surely suffer and cause each of them to reassess their own commitment. He had my undivided attention when I sat down at a formal meeting he set up to discuss his plan of action.
He offered to rent my building immediately. Then within a few months, purchase it as soon as his new larger facility was completed which would instantly increase his net worth. His old GMC dealership location would be available to rent to his friend with the Ford dealership license.
His offer was to pay me $5,000 each month as rent and within 60 to 90 days, purchase the property for upwards of 1.5 million dollars. My mortgage carried a monthly interest payment of $2,100 with the entire mortgage being $650,000. His offer was an unbelievable immediate huge appreciation of my purchase price.
My first order of business was to sit down with my bank loan officers. I made them aware of the radio station’s offer to purchase a small portion of land. They were willing to release that portion since the owner of the radio station was also a large depositor of theirs. I was to pay the net proceeds directly to the bank to pay down the original mortgage. The bank would secure, under the same terms a new mortgage to the radio station owner for the entire purchase price of $175,000. This would leave me with only $475,000 in bank indebtedness.
I got back to the owner of the GMC dealership and informed him that I would reduce his purchase offer by $175,000 if he would accept this arrangement. He immediately rejected it. He needed that space which required a separate fence installed around the anchor wire and post area that would reduce his storage space to an unsatisfactory condition. That existing space was a valuable asset necessary to run his dealership.
I immediately went back to the bank and informed them to leave everything the same as if no offer had been made. I then contacted the owner of the radio station and reinitiated a new deal which granted a subrogating 50 year lease agreement to pay the property owner into perpetuity a monthly rent of $500 with an annual 5% increase for the use of the space which was only approximately 10 square feet in circumference securing the anchor post and guide wire. The GMC dealership owner was very happy with this arrangement when I explained that nothing would be changed except he was to receive monthly rental income from the radio station.
My next meeting was immediately set up to include the entire board of the community bank. Before any formal offer was to be made or accepted for my property I had to convince the bank it would be in their best interest to undo a certain restriction that had come with my initial purchase.
I took the floor of the meeting and explained the reasoning the bank used when they put a minimum resale restriction on any mortgagee. It was to protect the bank by insuring they would be the mortgage holder at a fixed interest rate for a certain length of time. These same provisions could be made in a new purchase and sales agreement with the new mortgagee to insure the bank would continue to be the mortgage holder and their profit would not be affected adversely. The bank would have the opportunity to accept or reject any new owner if their credit worthiness was in question. This contingency was agreeable by both parties and the deal was consummated without delay.
With the bank’s approval in hand I completed the sale: The GMC dealer had a new location for his Subaru dealership. The radio station was happy to pay and the GMC dealer was thrilled to receive the monthly proceeds. The former owner of the property resumed selling Ford cars and trucks at the previous location of his buddy’s GMC dealership. The GMC dealer was able to move his dealership into an expanded territorial location with a brand new facility. And the best part of all was keeping my best advertiser satisfied, picking up not only new advertising from his new Subaru dealership, but creating a healthy competitive environment from two very large automotive advertisers to include the now very humble successful Ford dealership.
The bank president was happy because it rewrote my paid off mortgage to the GMC dealer who moved all his commercial business to them and increased his fully collateralized mortgage to 3 times my original mortgage amount.
In less than 90 days I had created personal wealth of nearly $1,000,000 that was used as a down payment to build a brand new Pennysaver facility that allowed me to expand my business with an impressive 800% percent growth over the next 4 years; then sell the entire operation to ABC/Disney for enough money to retire for life at the young age of 44. This is how I made my very first million dollars which I reinvested almost immediately before I was tempted to spend any of it on a lavish and excessive lifestyle.
Funny how things happen when you decide The Rule is… There are No Rules; just additional opportunities for everyone involved to capture a win-win using a vivid imagination and a little out-of-the-box entrepreneurial expertise.
Success can come to everyone if they keep an open mind and are always on the lookout for new opportunities. Ownership is the key to open the door of financial freedom. It can come to you very quickly if you only keep the other person’s best interest at heart. It is how I have conducted my entire business life and it has not failed me yet.
My newly revised Free E-Book, “I Am the Big Red Barn” could be that opportunity for ownership. First imagine your wildest financial dream. Then follow it up with a little skin in the game to provide purpose. Believe passionately in your sincere desire to help others who may be less fortunate than you, and through your efforts you will achieve any goal you set instinctively without any conscious effort.
A new belief system which is offered to you in my book will be your handy reference guide post and quite possibly your inspiration.
Lloyd R. Adams
Author and Publicist of the book, “I Am the Big Red Barn”