Articles Posted in Distressed Real Estate

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There are no shortage of bankruptcy considerations that must be understood by an incoming lender who acquires a distressed commercial real estate loan and whose borrower shortly thereafter files for bankruptcy protection. For the purposes of this article, we imagine a hypothetical distressed debt buyer who has acquired the loan with the goal of eventually obtaining the underlying property and who may be distressed (pun intended!) by the bankruptcy filing. While often considered an impediment to acquisition efforts, we believe that bankruptcy presents significant benefits and opportunities for the strategic loan-to-own investor.

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We recently provided an outline of items to diligence when purchasing a mortgage loan in distress—and separately also discussed issues to diligence when purchasing a mezzanine loan in distress. This post (the third in this series) outlines Uniform Commercial Code (UCC) foreclosures in general terms and describes key considerations for mezzanine lenders (and the purchasers of distressed mezzanine loans) contemplating or planning a UCC foreclosure.

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Checklist-1134900360-300x200When purchasing a commercial real estate loan that is in “distress,” it is crucial that one understands the nature of the defaults and the motivations of each party involved in the transaction and the deal. Diligence is key.

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Motel-565882567-e1648218576751-300x224Single asset real estate (SARE) is a unique classification under the Bankruptcy Code with implications for both debtors and lenders. SARE classification is apparent for a property such as a shopping center, apartment complex or office building where the debtor’s income is generated exclusively from real estate operations, but is less apparent for a hospitality property where the debtor may provide incidental services. Although a full-service hotel with a pool, fitness center and restaurant is not a SARE property, recent trends indicate that even hourly motels offering little-to-no onsite amenities may not qualify for SARE classification. Because SARE classification is viewed as providing lenders with distinct advantages in a chapter 11 case, property owners seeking chapter 11 protection to reorganize often try to avoid that classification, while lenders seek to impose it through sometimes costly litigation.

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In episode # 30 of Industry Insights podcast, Christian Salaman returns to join host Joel Simon to provide insights on the current recovery of the hospitality industry, the latest trends for owners and managers and the impact across other asset classes like senior residences and student housing.Industry_Podcast_cover-update-final-bottom Continue Reading ›

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In episode #29 of Industry Insights podcast, Andrew Weiner joins host Joel Simon for the second episode of our two-part examination of the Corporate Transparency Act (CTA). In this episode, Weiner turns his attention to the unanswered questions and ambiguity underlying phrases like “beneficial owner” and “substantial control.”

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One year into the pandemic, courts have almost uniformly found that COVID-19 does not permit commercial tenants to avoid their rent payment obligations. In this case, the court continued that trend, ruling that the pandemic was not a “casualty” that permits a tenant to abate its rent payments or cancel its lease. Authors Patrick J. PotterChristian A. BuergerHugh M. McDonaldPatrick E. Fitzmaurice, and Jonathan Doolittle discuss a new case from the Southern District of New York that extends the trend of courts enforcing leases against tenants forced to close due to the impact of the COVID-19 pandemic in “Court Finds Pandemic Does Not Satisfy Lease’s Casualty Clause.”

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President Biden has now signed the American Rescue Plan Act, a $1.9 trillion investment and stimulus package designed to address the ongoing COVID-19 pandemic, into law. Matthew OresmanElizabeth Vella MoellerCraig J. SapersteinBrian E. Finch, Aimee P. Ghosh, Rose Fowler Lapp discuss the relief bill which includes a new round of stimulus payments, along with dedicated aid for state and local governments, support to expand COVID-19 vaccination and testing programs, housing support, cybersecurity investments, support for the restaurant industry, and funds for school reopening plans. The alert, Congress Passes $1.9 Trillion COVID-19 Relief Package also provides an overview of how the bill affects  housing, mortgage, rental and utility assistance.

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On March 5, 2021, the SBA published an overview of eligibility requirements and a preliminary application checklist for the Shuttered Venue Operators Grant (Grant) Program. The overview of eligibility requirements clarifies ownership restrictions, prohibited activities, and business, operational and facility requirements for each type of business potentially qualifying for Grants.  Colleague David L. Miller discuss the SBA recently published requirements in “SBA Issues Eligibility and Application Guidance for Shuttered Venue Grants.”

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Real Estate partner Christian Buerger and Insolvency & Restructuring partner Hugh McDonald discuss COVID’s impact on commercial leases and an overview of the bankruptcy process the latest Swimming Lessons Series presentation.

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