Supermarket Anchored Retail

Defied Default


Back in 2002, The Henley Group’s founder, David Goldfisher, met the shopping center’s owner during a CMBS loan financing. The first half of this decade-long relationship was focused on acquisition financing opportunities, while the second half has been more focused on asset preservation activities.


The shopping plaza was originally an $11MM CMBS loan written in 2007. At the time of underwriting the loan’s debt service coverage was 1.20x. Within 12 months, though, the shopping center had lost four major tenants and the property’s occupancy dropped by 23%. By 2009, its debt service coverage had fallen to 0.60x and another major tenant was in default on its lease. Repairing the tenant default would have been costly and required state approval and environmental mitigation.

The Borrower’s cash reserves had been depleted by keeping the loan current for several years and the submarket’s retail leasing velocity was anemic, with market rents dropping 45% in an 18-month period.

  1. The client insisted on restructuring the loan without going into default.
  2. The Henley Group needed to persuade the Master Servicer to transfer a current loan to the Special Servicer and close on a discounted payoff before the loan ever went into default. (Typically, only loans that are in default or in imminent default are transferred to Special Servicing.)

THG quickly made a pitch to the Master Servicer. We supplied them with current financials, forecasts, rent rolls, market analysis, engineering studies, and an abundance of critical due diligence including costs for the state mandated environmental mitigation options.

We outlined a clear and rational restructuring plan that would be to the advantage of both sides:

  • The Trust would enjoy the highest net recovery possible
  • The Borrower would be able to retain and rebuild his tenant base at Pelham Plaza

THG’s access to the right CMBS players and nimbleness of action, allowed the Master Servicer to complete their required business plan and take the initial steps towards the transfer. In addition, our detailed preparation saved the Master Servicer time and we were able to “strike while the iron was hot.”


The loan was successfully transferred to Special Servicing and negotiated prior to ever appearing on the Lender’s watch-list. THG and the Borrower were able to line up additional equity for the project, take out the Lender with new financing, mitigate the outstanding issues with the major tenant, and lock up a 36% discounted payoff without going into monetary default.

Not only was the Borrower able to hold onto his property, but he also signed a new tenant during the negotiation process–consequently stabilizing the building’s net operating income. With the capital stack now rebalanced, the Borrower is cash flow positive at the property with significant financial upside going forward.

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