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Re-plotting the Course of Servicer Negotiation

Background

The property owner was very committed to retaining and redeveloping this property even after the loss of its major tenant, which left the property 60% vacant. For six frustrating months, the owner attempted to communicate the difficulties surrounding the tenancy and weak market conditions to the Servicer.

Challenge
  • The Borrower was unable to sufficiently capture the Lender’s attention and initiate any meaningful dialogue
  • The Lender did not understand the surrounding area’s dire market conditions, proximal big box competitor vacancy issues, the building’s equity requirements, and the Operational & Easement Agreement associated with the site

These factors contributed to a significant loss of value and placed the loan’s repayment in jeopardy.

Goals

When the Henley Group took charge of the negotiations with the Special Servicer, we knew we would need to re-plot the course of Servicer negotiations, immediately, to effectively execute a deal.

Execution

During the latter phases of the negotiations and after the A/B note amounts had been mutually agreed upon, THG discovered that the primary asset manager was retiring and would be turning over the file to a new asset manager. After THG’s initial conversations with the new asset manager, THG sensed a reluctance on the part of the Lender to move forward with the previously negotiated deal terms.

As opposed to remaining entrenched in its previous position, THG and the Borrower mutually decided to increase the A note by an amount that supported the Lender’s appraisal and was within the Borrower’s target zone. Had the concession not been offered, the deal would likely have cratered because the original A note amount did not conform to the Loan Committee’s NPV requirement.

Outcome

The Henley Group was able to focus the Lender, amalgamate the due diligence, model and re-model various requested financial scenarios, and chiefly create a competent rapport with the Lender.

The deal was subsequently approved by the Lender’s Loan Committee and the Borrower received approximately a 60% reduction in principal and interest payments for 5 years.

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