Distressed Real Estate
Acquisitions & Sales of Nonperforming Loans & Assets
ArentFox Schiff has 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 lawyers have closed more than $10 billion in transactions.
ArentFox Schiff’s 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. Our lawyers have detailed, practical experience with the varied sales programs used by the Resolution Trust Corporation, FDIC, the US Department of Housing and Urban Development, and the many programs sponsored by commercial bank, 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.
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 for modifying the structure of their arrangements, at every step of a project’s life.
ArentFox Schiff has 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.
Workouts & Loan Restructuring
ArentFox Schiff has represented borrowers, lenders, and other loan participants in loan modifications, payment deferral, 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 – for example, providing advice as to the use or prepayment of all of borrower’s existing lines of credit (not just the ones in default) and evaluating and adjusting real estate occupancy costs and other organization wide expenses. We also design specific measures 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 lawyers 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.
In the event a bankruptcy proceeding is commenced, our real estate and bankruptcy lawyers 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.
- On behalf of a special servicer, closed the restructuring 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 multi-family 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.
- On behalf of a national bank, restructuring debt related to a high-security medical laboratory facility – Albany Medical Center.
- On behalf of a national bank, negotiated a deed in lieu transaction and subsequent sale of a large regional mall in Sacramento, California.
- On behalf of a national bank, initiated a foreclosure proceeding in connection with a senior loan secured by a large lifestyle center in the Mid-West, and ultimately negotiated a consensual workout and refinancing plan for the asset.
- On behalf of a major Washington, DC area real estate developer, negotiated a discounted payoff arrangement and ultimate sale of a large retail center.
- On behalf of a national bank, negotiated a deed in lieu transaction and ultimate sale of a large retail center located in New Jersey.