Our client, a prominent regional bank, was nearing completion of their merger & acquisition. Among the most pressing challenges was the sale of two suburban office properties that were encumbered by senior mortgage liens, which were significantly underwater non-performing loans (NPL) being managed by the bank’s special assets group (SAG).
Background
Our client, a prominent regional bank, was nearing completion of their merger & acquisition. Among the most pressing challenges was the sale of two suburban office properties that were encumbered by senior mortgage liens, which were significantly underwater non-performing loans (NPL) being managed by the bank’s special assets group (SAG). The borrower, a private equity fund, were out of equity, unable to meet their financial obligations, and already had the office properties listed and marketed for sale with one of the top 5 national brokerages. The impending completion date of their M&A created an urgent need for resolution.
Client’s Needs
The bank needed a rapid exit strategy for these properties, as they were under a mission critical deadline to finalize their M&A by the end of the year (EOY). The bank needed to avoid taking ownership of these properties via foreclosure or deed-in-lieu due to potential lender liability concerns with holding title and bringing the assets into the newly formed bank entity. This required a structured CRE sale that needed to be executed under a tight timeline.
Challenges
- Underwater Mortgage: The senior mortgage liens on both properties were significantly higher than the current market value of the assets.
- Time Constraints: With the bank’s M&A nearing completion, the bank had an extremely tight deadline to close the deal before the end of the year, adding additional pressure to find qualified buyers quickly.
- Borrower’s Position: The borrower, a private equity fund, did not want to contribute additional capital to stabilize the assets or to refinance the loans. After a year of marketing their broker failed to produce a competitive market only resulting in a few subpar offers that all failed to close.
- Avoidance of Foreclosure: The bank did not want take these assets, or its ownership liabilities, onto the balance sheet of their newly formed bank post M&A. The ideal scenario involved securing a structure where the borrower could exit the deal without jeopardizing the bank’s position.
Our Solution
Our firm was engaged to facilitate the disposition of the two office properties in order to clear both the non-performing loans (NPLs) off the bank’s balance sheet prior to their M&A deadline.
- Structured Settlement Sale: Our proposed structured settlement sale arranged for the bank to accept partial paydowns from the borrower in exchange for executed deed-in-lieu agreements for both of the loans. Next the bank would close an all-cash sale of the non-performing loans (NPLs) to the individual buyers at a discount to par effectively clearing the CRE loans off their balance sheet. The buyers would then utilize the deed-in-lieu agreement assignments to acquire title to the fee simple interest(s). All of these agreements were to be executed in a simultaneous close and recording.
- Identifying Qualified Buyers: Our team leveraged our extensive network of high-net-worth investors and institutional buyers, identifying two all-cash buyers, one investor and one local developer, who were ready to close quickly, significantly streamlining the process. These buyers were highly interested in acquiring the assets and weren’t deterred from the proposed structured settlement sale.
- Negotiating a Paydown: The borrower recognized the value in releasing their interest in the properties from an asset liability perspective, loan liability perspective and fund liability perspective. They also recognized the value of the proposed structured settlement transaction and, therefore, agreed to a partial paydown of the past due interest to help offset the cost of the transaction and the bank’s losses.
- Expedited Closing Process: With the bank’s M&A deadline fast approaching, we worked with both the buyers, the borrower and the bank to ensure that the transaction closed in less than 30 days. Our team managed the complex negotiations, all the business items and assisted in closing and post closing action items.
Results
- Successful Transaction in Under 30 Days: The transaction was completed in under 30 days, well within the bank’s required timeline for the M&A process.
- Lender Satisfaction: The bank was able to exit the deal with minimal impact on their balance sheet and avoided the liabilities of foreclosure or taking ownership of the properties.
- Borrower Relief: The borrower was able to exit the deal without additional liability, having negotiated a clean release of their interest in the properties.
- Buyer Acquisition: The two all-cash buyers successfully acquired the properties and are now in the process of repositioning the assets to unlock greater value, positioning themselves for long-term success.
Conclusion
By leveraging our industry expertise, market knowledge, and network of qualified buyers, we were able to execute a structured CRE sale that met the needs of all parties involved – the lender, the borrower, and the buyers. Our team’s ability to navigate complex negotiations, manage tight timelines, and mitigate risks ensured a successful outcome for this lender asset sale.
This case highlights our capability in handling distressed and complex transactions, demonstrating our deep understanding of the intricacies of specialty investment sales. Our hands-on approach and commitment to execution enabled our client to meet their objectives while preserving value for all stakeholders involved.
Interactively engage distributed alignments via focused alignments.
Interactively engage distributed alignments via focused alignments. Dynamically fabricate excellent innovation for go forward technology. Intrinsicly impact empowered scenarios after cost effective outsourcing. Synergistically productivate pandemic e-business rather than state of the art e-tailers.
Interactively engage distributed alignments via focused alignments.
Interactively engage distributed alignments via focused alignments. Dynamically fabricate excellent innovation for go forward technology. Intrinsicly impact empowered scenarios after cost effective outsourcing. Synergistically productivate pandemic e-business rather than state of the art e-tailers.
- Interactively engage distributed alignments
- Interactively engage distributed alignments
- Interactively engage distributed alignments
- Interactively engage distributed alignments
- Interactively engage distributed alignments
Interactively engage distributed alignments via focused alignments.
Interactively engage distributed alignments via focused alignments. Dynamically fabricate excellent innovation for go forward technology. Intrinsicly impact empowered scenarios after cost effective outsourcing. Synergistically productivate pandemic e-business rather than state of the art e-tailers.
