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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

  • work Practice Area

    Real Property - Finance

Date & Time
  • event Date

    Tuesday, September 20, 2022

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00
CLE
ALL

This CLE course will examine the due diligence and transactional issues involved in acquiring distressed mortgage and mezzanine debt. The panel will outline strategies to identify and mitigate risks and liabilities for both the buyer and seller.

Faculty

Patrick E. Fitzmaurice
Partner
Pillsbury Winthrop Shaw Pittman LLP

Mr. Fitzmaurice's practice focuses on representing lenders and other creditors in workouts, restructurings, litigation and bankruptcy matters. He regularly represents clients in fraudulent transfer and other types of avoidance litigation. Mr. Fitzmaurice is also frequently involved in advising creditors in foreclosure and other types of enforcement actions involving real estate and UCC collateral.

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Caroline A. Harcourt
Partner
Pillsbury Winthrop Shaw Pittman LLP

Ms. Harcourt represents lenders, owners, investors, developers and tenants in all aspects of commercial real estate. She is the head of the firm’s Real Estate Finance Group and also leads the New York Real Estate Group. Ms. Harcourt advises on acquisitions and dispositions of property, ground leases and space leases, development projects including large mixed-use development projects, joint ventures, borrower-side financing transactions, condominium projects and hotel management and related arrangements. She also represents lenders in connection with the origination, sale and purchase of mortgage and mezzanine loans and the negotiation of intercreditor, co-lender and participation agreements in multitiered debt stacks. Having practiced through several real estate cycles, Ms. Harcourt also has considerable experience representing lenders, borrowers and investors in connection with distressed real estate loans and other assets, including forbearances, workouts, foreclosures and restructurings (both in and out of bankruptcy).

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Description

The current real estate loan market allows investors to acquire distressed debt at a discount and for holders to offload defaulted loans from their balance sheets. Still, buyers and sellers must clearly understand the due diligence and documentation issues to consider in a loan sale.

Due diligence of the loan and underlying collateral are critical to a successful transaction. As a successor to the lender, the investor can pursue remedies such as foreclosure and claims against the guarantor. The investor must examine the title, zoning, building code, environmental, and other property-level issues and identify expenses and impediments (receiverships, ongoing lawsuits) to exercise any loan remedies.

Mortgage transfer documents should include the loan purchase and sale agreement (LPA), any attachments, recordable assignments of recorded documents, and the original loan documents. Representations and warranties are a crucial part of the LPA. The buyer and the seller will typically indemnify one another for losses for actions or events caused by the indemnifying party during its ownership of the loan.

Mezzanine loans present unique concerns. In addition to the LPA and its attachments, the purchaser must obtain an assignment of the pledge of the ownership interest in the borrower and the associated UCC, as well as the intercreditor agreement. Counsel must thoroughly understand the entity structure and any consents required from the mortgage lender to transfer the mezzanine loan.

Listen as our authoritative panel discusses the nuances of buying and selling distressed real estate debt.

Outline

  1. Purchasing distressed as opposed to performing debt
  2. Due diligence
    1. Review of existing loan documents: locating originals and understanding key terms
    2. Property-level issues: title, survey, environmental, property condition, and other property-specific considerations
    3. The borrower and guarantor (and restrictions on actions by borrower under its organizational documents)
    4. Outstanding claims, litigation, bankruptcy
    5. Notices of Default and pending foreclosure filings, if any
    6. Knowing your Loan seller
    7. Intercreditor Agreement, if there is a Mezzanine Loan
  3. Due Diligence if the Loan Being Purchased is a Mezzanine Loan
  4. Documentation
    1. Loan purchase agreement
  5. Post-Acquisition
    1. Mortgage Foreclosure and guaranty enforcement
    2. Mezzanine Foreclosure
  6. Bankruptcy issues

Benefits

The panel will review these and other notable matters:

  • What types of due diligence must be conducted on the underlying property before proceeding with a loan purchase?
  • How should a loan-to-own lender consider foreclosure and other enforcement in pricing and due diligence of the acquisition of a distressed real estate loan?