Feeling Less Distress: CRE Lawyers Say Their Work Is Shifting Away from Troubled Assets

  

Michael Bull

 ATLANTA, GA– Commercial real estate lawyers are doing less work with distressed assets and are instead spending more hours on leases and investment sales.

 That was one of the points made by a panel of attorneys on the most recent episode of the “Commercial Real Estate Show” radio program, hosted by Michael Bull of Bull Realty.

The episode provided an enlightening look at the various legal issues confronting the commercial real estate sector. Topics included loan workouts, selling and buying notes, foreclosures and the most pressing lease issues.

Andrew Litvak

  “The last few years have definitely been a turn for the better,” said Andrew Litvak, a partner with the Nelson Mullins law firm. “We’re seeing more of what I would characterize as good work: leasing activity, investment sales and purchases. There’s still a lot of pent-up distressed real estate and problems to be worked out, but it seems to be tapering off.”

Jeffrey Schneider

When faced with troubled assets, many lenders are choosing to sell notes instead of foreclosing on the underlying properties, as foreclosure can be an expensive process that exposes them to the risks and hassles of property ownership. 

Someone thinking of buying such a note should be prepared to perform rigorous due diligence, especially when, as is often the case, the loan was between a bank and a borrower who have enjoyed a long and friendly relationship, said Jeffrey Schneider, a partner with the Weissman Nowack Curry & Wilco law firm.

Michael Ward

 “You’ve got to really drill down on the loan-servicing side,” Schneider said. “Make sure there aren’t any handshake agreements to waive penalties or payments. Get as much loan-servicing information as you can get.”

 Due diligence can become especially complicated and time-consuming when buying a large portfolio of loans, because the underlying assets typically are scattered across several states, said Michael Ward, who is of counsel at the Greenberg Traurig law firm. “From a legal side, the sheer due diligence … can be fairly intensive,” Ward said.

Carter Stout

 Such large loan portfolios usually are aggressively pursued by several bidders, Ward added. “You’re going to have two, three or four large players going after that one portfolio, and they’re very competitive,” he said.

 Lenders generally are more willing to make loans these days but they also have beefed up their loan covenants, said Carter Stout, real estate practice leader at the Stout Atwood LLC law firm. By and large, borrowers don’t have much negotiating power to make those covenants less severe, Stout added.

 “The practical reality is, generally, there are very few sources of money out there, and [borrowers] are stuck with a small group of lenders who are going to insist on certain covenants,” Stout said.

For a complete copy of the company’s news release, please ontact:

Stephen Ursery

The Wilbert Group

404.965.5026

sursery@thewilbertgroup.com