Multi-Family

Juggling Negotiations with Dual Special Servicers

Challenge

Originally, the CMBS Lender made two different loans to the Owner of these 200+ multi-family units. The loans were securitized in two different pools. When the loans began to falter, due to weak market conditions and the overall recessive economy, the Borrower had to deal with not one, but two Special Servicers, each with individual agendas and acceptable resolution tolerances.

The LLC’s managing partner had no additional equity to put into the project and the institutional equity partner was unwilling to invest new capital into the project. The managing partner’s overall goal was to reduce his indebtedness on the properties and extricate himself from the burden of $30,000,000 in loan obligations.

Goals

Given the challenges we faced, our goals became the following:

    • Persuade the new investor/buyer that
      1. The economics of the deal provided sufficient return to warrant their investment
      2. That purchase of the properties outright versus investing in the existing entity would be to their advantage.
    • Compel both Special Servicers, individually:
      1. To agree to aggressive discounted pay-offs
      2. To allow reasonable equity capital to be returned to the Borrower even though the Servicer was taking a significant discount to their notes properties
      3. That neither Servicer was receiving a stronger economic deal than the other
      4. that the sale of the properties post-discounted pay-offs was at a fair price and would not breach their fiduciary responsibility to the bondholders of the Pool
Execution

THG advised the client to:

      • Undertake a complete and accurate accounting of all revenues and expenses for all of the units and then present multiple detailed spreadsheets to the Servicers
      • Keep the various existing investors on the same page versus chasing individual outcomes
      • Provide to Special Servicers all due diligence and financial disclosures required
      • Sign the complicated reps and warrants required by one of the Servicers
Outcome

Despite the difficulty of the transactions involved, THG was committed to making this deal advantageous for both the client and both Special Servicers. In the end, the Special Servicers agreed to approximately a 67% pay-off and THG’s relationship with the Servicers was strengthened.

Whether your loan is currently in Special Servicing or may be heading down that path in the next 24 months, we can help. Contact us.