Game Overe...or... Overtime


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Stephen grant, Game Overe...or... Overtime

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Game Overe...or... Overtime

  1. 1. Game Over…Or… OvertimeSteve Grant-Founding Partner, Property Recovery Advisors Ann Hambly-Co-Chief Executive Officer/Founder 1st Service Solutions
  2. 2. Game Over…Or…Overtime
  3. 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. 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 GuaranteesGame Over…Or…Overtime
  5. 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 PurchasesGame Over…Or…Overtime
  6. 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 strategyGame Over…Or…Overtime
  7. 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. 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