Provisions in commercial mortgage loan documents, where a particular state law is “selected” as the governing law, can drive a deal into a ditch, and take a good (or growing) lending relationship into the emergency room. In many situations, this topic is a good example of over-thinking, and perhaps over-lawyering. Simply stated, which of these two… Continue Reading
Category Archives: Workout Issues
Subscribe to Workout Issues RSS FeedHide and Seek: Service of Process as a New Loan Provision
Posted in Good Times for Lenders, Remedies, Training, Workout IssuesLenders are refreshing their mortgage loan documents with provisions based on the “lessons learned” during the recent (continuing?) economic experience. One change is to add a service of process provision. The change is based on this basic lesson learned: when the tough times hit, borrowers and guarantors sometimes are hard to find. A few simply… Continue Reading
Early Pay-off of a Commercial Mortgage Loan? Shhhh – here’s “why” it makes sense
Posted in Tough Times for Lenders, Workout IssuesAcceptance by commercial real estate lenders of a partial payment in full satisfaction of the loan (as a “discounted payoff” – a “DPO”), prior to the maturity of the loan, is a topic that receives little “public” attention. Here are a few reasons why we hear so little about this topic, and the challenges in… Continue Reading
Workout Tips For Lenders: A Quick “Wish List” (check this list)
Posted in Tough Times for Lenders, Training, Workout IssuesIt’s always good to have the “big picture” in one hand as you deal with the troubled loan with your other hand. Previously, we’ve touched on preliminary tips and steps, and even some tips on the “art” of dealing with a mucked up deal and with “less than friendly” people – and don’t overlook the… Continue Reading
Why the Co-lender Train Wreck? Lenders Used Wrong Agreement
Posted in Good Times for Lenders, Tough Times for Lenders, Training, Workout IssuesTrain wrecks draw a crowd. Look at this old film from the 1913 California State Fair (click the text). 1913 Train Wreck Unfortunately, many co-lender structures (secured by distressed commercial real estate) look exactly like this train wreck…. Continue Reading
Need to “Reposition” the Distressed Project or REO? Consider a Condominium
Posted in Tough Times for Lenders, Workout IssuesSo much of dealing with distressed commercial real estate is an “out of the box” experience. But my use of the phrase “out of the box” is extremely nuanced: change your thinking; and change the box (the property), too. Here’s an approach that goes out of box and then reverses field to “remake” the box… Continue Reading
Lessons Learned: More Tips on Topics to be Included in Loan Documents (& Modifications)
Posted in Market Trends, Training, Workout IssuesPeriodically I touch on topics that could be, or should be, covered in loan documents – either when the loan is initially closed and funded, or when the terms of the loan are revisited during an extension or a restructure (collection of blog posts on "lessons learned" [it is a long list]). Here are… Continue Reading
More Trouble: Will Record Online Sale Numbers Transform Sticks & Bricks Retailing in 2012? I say “yes”
Posted in Market Trends, Technology (including Green Buildings), Training, Workout Issues2012 should be the year when online sales broadly impacts "how" retailers view and use their "physical" stores. This will impact both the owners AND the lenders. Record online sales point to the need (RIGHT NOW) to take a different approach in reviewing and approving retail leases – which for lenders with shopping center and… Continue Reading
Special Purpose Vehicle (SPE): Comment in Recent US Supreme Court Case Encourages Bankruptcy Risk
Posted in Good Times for Lenders, Market Trends, Single Purpose Entity, Workout IssuesRecently, Professor Joshua P. Fershee posted a very interesting observation on the Business Law Prof Blog. Professor Fershee comments on a legal concept called the "single enterprise" theory, and on references to this concept by the US Supreme Court in a decision published by it this past summer (Goodyear Dunlop Tires Operations, S.A. v…. Continue Reading
Defaulted Hotel (California) Loans: Nice Story in Bloomberg; Here are some practical tips
Posted in Market Trends, Remedies, Tough Times for Lenders, Workout IssuesNadja Brandt and Kara Wetzel with Bloomberg have a nice piece on the scope of and challenges in dealing with defaulted hotel loans in CMBS pools. It is a good read. And it has been picked up or syndicated in other news media. As I’ve noted before, with a hotel or motel securing the loan,… Continue Reading
The Collection Plate: Don’t Overlook the Marital Status of the Loan Guarantor or Indmenitor
Posted in Workout IssuesCollecting on a judgment against a commercial loan guarantor or indemnitor brings into focus one bedrock question for a commercial loan guaranty or an indemnity: in collecting on the judgment, does the marital status of the guarantor or the indemnitor come into play? does this status take some assets beyond the reach of the judgment?… Continue Reading
Navigating Distressed Co-Lender Loans: Just Another (Dysfunctional) Modern (Finance) Family?
Posted in Market Trends, Tough Times for Lenders, Workout IssuesEarlier, I offered up some advice that in a workout, you really can’t take it personally. If that didn’t work for you, then here’s another approach that should resonate (I can’t get it out of my head): if you’re in a loan with other lenders, the co-lender structure probably has some real, real, real dysfunctional aspects to it … Continue Reading
Leases, Lenders & Letters of Credit: Lenders Taking New Approaches With Tenant Letters of Credit (lessons learned)
Posted in Good Times for Lenders, Tough Times for Lenders, Training, Workout IssuesWe know commercial real estate is all about the rents – and the credit of the tenant, which some times is enhanced by the tenant giving the landlord a letter of credit. David Staas and Michael Thomas recently clued me in on several lessons learned by commercial mortgage lenders, on the topic of letters of… Continue Reading
Who Are Those Guys? New Use of Adverse Possession
Posted in Market Trends, Tough Times for Lenders, Workout IssuesPerhaps you’ve noticed this legal phrase cropping up on the national evening news, or in your local paper: adverse possession. Generally, most states have laws which allow a person to obtain legal title to real property based upon taking physical possession of it over a specified period of time, and doing so in a manner… Continue Reading
Lessons Learned: Future Loan Documents Should Cover These Topics (part ___)
Posted in Good Times for Lenders, Training, Workout IssuesGame #6 of the World Series (my Rangers v the now World Champion St. Louis Cardinals) gives the Rangers some painful pointers on "where" to improve for 2012: find someone, anyone, who can get a third strike – for the last out in an inning, for a win of the game, for a World Series… Continue Reading
Baseball Reflects Life: Guidance on Calling it Fair or Foul in Dealing with Distressed Loans
Posted in Tough Times for Lenders, Training, Workout IssuesWith Game #6 of the 2011 World Series (Texas Rangers v St. Louis Cardinals) scheduled to play tonight after a rain-delay day, baseball is on my mind. As we’ve seen in Games 1-5, baseball is a game of – inches: as in Cruz catching a Pujols fly ball with his back to the outfield fence… Continue Reading
Golf Course Loans in Default: Tough Topics When Playing in the Rough
Posted in Tough Times for Lenders, Training, Workout IssuesLoans secured by a golf course present some very unique problems when the loan is in distress. At the annual meeting of the American College of Mortgage Attorneys, Nancy Little, Bessie Giannopulos and Robyn Nordin Stowell gave an excellent presentation on this topic. I’ve added some of their topics to my list of hazards… Continue Reading
A/B Note Structure Is Tough: More Points For Your Due Diligence List
Posted in Market Trends, Tough Times for Lenders, Training, Workout IssuesMore on my focus on A/B Note structures (earlier posting), covering key structural points that surface during a workout involving both an A note and a B note: What is the credit support impact of the B note holders rights? Huge. If the intercreditor agreement (covering the relative rights of the A note holder and the… Continue Reading
A/B Note Structure Is Tough: Put These Questions On Your Due Diligence List
Posted in Market Trends, Tough Times for Lenders, Training, Workout IssuesThe A/B note structure grabbed considerable attention in 2009 when the Federal Financial Institutions Examination Council (FFIEC) issued it’s "Guidance on Prudent Commercial Real Estate Loan Workouts." Recently, the A/B note structure is making a come back in new loan origination. Here are a few basic questions that will help you understand some of the… Continue Reading
Purchase of Defaulted CMBS Loans & Discounted CMBS Loan Pay Offs: Step #1 – Understand the PSA
Posted in Tough Times for Lenders, Workout IssuesCMBS loans have some very, very unique qualities that come into play when a buyer wants to purchase a defaulted CMBS loan. (These blog posts and this paper [down loaded 300+ times to date] are good resources on understanding distressed CMBS loans; and how they differ from bank loans or life company loans.) The result… Continue Reading
CMBS Defaults & Delinquencies on the Rise? Yes. Distressed or Defaulted CMBS Loans Still Misunderstood? Yes.
Posted in Tough Times for Lenders, Workout IssuesTwo things jumped out at me this morning: I was surprised to read about Fitch’s announcement that CMBS defaults rose to 12.9% at the end of June, and that CMBS delinquencies were at a record high in July (at 9.88%). This means that work on distressed CMBS loans will not taper off in the near… Continue Reading
Want to Improve Rents & Occupancy at Apartments & Student Housing? One word: Technology
Posted in Technology (including Green Buildings), Workout IssuesIn the movie The Graduate (1967), Ben learns that one word (“plastics”) is the pathway for a successful career. Today, for distressed investments or for quality apartments (including apartments pointed to students as tenants), the pathway to higher rents, occupancy and value is this one word – Technology. The technology attributes of a community can… Continue Reading
Commercial Leases & Rents: Practical Comments on Rents for the Loan Originator, Loan Admin and Special Servicer
Posted in Remedies, Tough Times for Lenders, Workout Issues“assignment of rents” “Uniform Assignment of Rents Act” “Texas Property Code chapter 64″ “lock box” “notices” “absolute assignment of rents” “collateral assignment of rents” “recourse event”
Fraud in Commercial Real Estate: Tips & Red Flags on Money Laundering & Terrorist Financings
Posted in Market Trends, Tough Times for Lenders, Workout IssuesMy posting last week on "high level" tips on commercial real estate fraud (relaying information from Mike O’Neal) was one of the most highly read topics in the last month. So, with that your interest giving me important guidance, below is a follow up by Mike on specific tips and red flags about money laundering and… Continue Reading