Real Estate Workouts, Restructuring & Distressed Debt

Turnarounds, Workouts & Debt Restructuring 

We have represented borrowers and lenders, including but not limited to national, regional, and community banks, life insurance companies, financial investors and other loan participants in loan modifications, payment deferrals and other forbearance arrangements, intercreditor agreements, and other workout arrangements with respect to virtually every kind of real estate collateral.

We continuously represent many of the most active and sophisticated developers, owners, investors, and lenders in the real estate industry, across virtually every sector and project type. As a result, we understand how real estate participants operate their businesses, not just how to structure and negotiate their individual projects, and we have unparalleled credibility and access to financial institutions and other market participants. These assets are invaluable to us in workout situations, where bringing a project into compliance in the most cost-effective manner often requires a great deal more than simply modifying the economics of an individual loan.

We take a comprehensive and creative approach, exploring a broad range of options for reducing the borrower’s costs in lean times. We also evaluate opportunities to minimize or avoid costs associated with the workout transaction itself, such as breakage fees that could result from the termination of swaps, caps, collars, and other interest rate hedge instruments.

Even if bankruptcy is not an imminent threat in a lender representation or an attractive option in a borrower representation, the possibility and implications of bankruptcy proceedings drive several aspects of any workout transaction, and our real estate attorneys work closely with our bankruptcy attorneys throughout the process. ArentFox Schiff’s tax practice also plays a crucial role, particularly where a restructuring or recapitalization of the borrower or an upstream entity is involved, or when the economic terms of the workout implicate gain realization issues or present opportunities to defer or avoid income or capital.

Entity Restructuring / Preferred Equity

Borrowers, developers, investors, and other participants routinely engage in joint ventures, alliances, and other contractual arrangements when organizing their projects. Restructuring and recapitalization of these ownership vehicles is often a critical component of a successful workout. In other cases, bringing a new participant into a transaction and/or shifting control over ownership vehicles from one participant to another can get off the ground a faltering project that would otherwise fail. We routinely advise clients in identifying the most business-efficient and tax-efficient methods of structuring their arrangements, as well as modifying the structure of their arrangements at every step of a project’s life.

Acquisitions & Sales of Underperforming Loans & Assets

We have advised investment banks, private equity and debt funds, commercial banks, insurance companies, and loan servicers in the underwriting, acquisition, financing, management, and disposition of nonperforming and subperforming mortgage loans and mortgage-related assets. Our attorneys have closed more than $10 billion in transactions.

Our work with distressed mortgage assets started in 1991, at the beginning of the savings and loan crisis and the creation of the Resolution Trust Corporation, and has continued through all subsequent economic cycles, including the great recession of 2008 and current economic conditions. Our attorneys have detailed, practical experience with the varied sales programs used by the FDIC, the US Department of Housing and Urban Development, and the many programs sponsored by commercial banks, insurance companies, and other financial institutions to dispose of their troubled mortgage assets and real estate.

Our experience includes the direct purchase, sale, and financing of commercial mortgage loans, mezzanine loans, loan participations, manufactured housing loans, and tax-exempt bonds. In addition to our work on whole loan sales, we have advised clients who have participated in the special investment and joint venture vehicles used by the government, private sector investors, and loan servicers to dispose of troubled mortgage assets.

Foreclosures

We have handled foreclosures, deed-in-lieu arrangements, discounted payoffs and similar transactions with respect to retail, residential, mixed-use, office, industrial and hotel properties. We understand that foreclosure may in some cases be simply a tool to motivate the parties to agree on a consensual workout arrangement. However, when a consensual workout does not materialize, we know how to coordinate and streamline the foreclosure and/or transfer of the property in an efficient manner.

Bankruptcy

In the event a bankruptcy proceeding is commenced, our real estate and bankruptcy attorneys work side by side to protect our lender clients’ collateral, enhance their recoveries, and manage the budget and use of cash to fund a case. Our team also routinely advises lenders and participants through the purchase or sale of their loan positions while a borrower is in bankruptcy. 

Our Work

• Represented a special servicer in the closing of a $330,000,000+ senior loan involving a new $25 million mezzanine facility, secured by a portfolio of 11 branded and independent hotels located in six different states. Complex pooling and servicing, intercreditor, cash management, and hotel franchise issues were addressed and resolved.
• Represented a senior lender in the successful restructuring of a major multifamily portfolio in The Bronx, including cross-collateralization and establishment of new reserves, resulting in a subsequent full repayment of the loan.
• Represented a retail mall developer in connection with modifying and extending nearly a billion dollars of securitized mortgage loans requiring extensive negotiations with special servicers and operating advisors.
• Represented a national bank in restructuring debt related to a high-security medical laboratory facility – Albany Medical Center.
• Represented a national bank in negotiating a deed in lieu transaction and subsequent sale of a large regional mall in Sacramento, California.
• Represented a national bank in initiating a foreclosure proceeding in connection with a senior loan secured by a large lifestyle center in the Midwest, and ultimately negotiated a consensual workout and refinancing plan for the asset.
• Represented a major Washington, DC area real estate developer in negotiating a discounted payoff arrangement and ultimate sale of a large retail center.
• Represented a national bank in negotiating a deed in lieu transaction and ultimate sale of a large retail center located in New Jersey.
• Represented a regional bank in negotiating a repayment of a participation from lead bank.
• Represented a national bank in a successful pre-foreclosure deed in lieu.