3. Who?
Steve Grant-Modified 54 loans in the last 44 months with
face amounts totaling $1.37 Billion. Raised $37.2 million in
new capital to achieve terms of modification proposals with
lenders.
Developing a Script for success…
Game Over…Or…Overtime
4. Who and Why?
On-Book Lenders
Banks-Recourse and Non-recourse
Insurance Companies
Pension Fund Advisors and REMICs
Reasons for Engagement
Tenant Move out or Bankruptcy
General Cash Flow Declines with renewals at lower market rental rates
Unfunded or Underfunded Leasing Reserves
Loan Maturity
Covenant Default (Debt coverage violations, Resizing issues, Key
tenant loss)
Material Change in Financial Condition Related to Guarantees
Game Over…Or…Overtime
5. How?
The Set Up and Evaluation
Review of all major documents and contact data bases
Cash Flow Analysis and Value Estimates
Initial contact with lenders and other lien holders
The goal is to create an advocate within the lender to present the
case for modification
The Script incorporating the Strategy
A/B Note Structure
Forbearance
Deleveraging
Discounted Pay off
Bank Deposits/Annuity Purchases
Game Over…Or…Overtime
6. What?
Industrial
State of the Art Buildings not likely candidates
Multi-tenant, low ceiling heights, specialty improvements, non-
conforming locations are the likely Industrial property candidates
Office
Most office property types are candidates
Retail
Most retail property types are candidates
Investment Size
Loans from $2 to $10 million take longer to resolve, but the
resolutions are more attractive
Larger loans $25 million plus require a new equity strategy
Game Over…Or…Overtime
7. Case Study #1
112,000 SF Shopping Center Anchored by Food Maxx and Walgreens
Food Maxx Moves out and triggers Co-tenancy move out option for Walgreens
Covenant Violation requiring immediate cash management agreement (CMA) and
rebalancing.
Loan is $14.5 M at 6.47% and 30 year am. And joint and several recourse to 6 partners.
2010 cash flow of $327,000 is a 1.38 DCR
Rebalance notice requires $3.9 Million pay down so loan maintains a 1.1 DCR on
current NOI.
Solution-Borrower pays for leasing costs on replacement tenant-Mi Pueblo
($585,000) and Famsa USA ($218,000). Loan enters a 24 month forbearance
period with a CMA in place which allows interest to accrue at a 4.5% rate during
the free rent period of the two replacement tenants. Two guarantors are
released.
Game Over…Or…Overtime
8. Case Study #2
Three cross defaulted/cross collateralized self storage facilities. 24 joint and
several guarantors. Lawsuit against developer.
Loan is a construction/mini-perm of $23.6 Million with a 6.42% interest rate
and an interest only period expiring. Conditions relating to income
achievement have not been met and loan is due.
Complete reconstitution of borrower including removal of managing
member. Exiting investors pay loan down $3.2 Million to be released
from the guaranty. 6 remaining investors restate guarantees. Purchase
$500,000 in annuity product from insurance company.
Loan Maturity date extended to 2017/interest rate is reduced to 3.5%
for two years-increasing 0.5% every year thereafter interest only.
Each loan now stands on its own with allocated balances.
Game Over…Or…Overtime