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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, March 29, 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 webinar will examine the due diligence and transactional issues involved in acquiring and financing distressed real estate. The panel will outline strategies to mitigate risks and liabilities for the buyer, seller, and lender, as well as discuss the additional issues when purchasing and financing commercial property out of bankruptcy or receivership.

Faculty

Christopher Harayda
Partner
Miscellaneous
Allen J. Dickey
Miscellaneous

Mr. Dickey practices in all aspects of real estate finance, securitization, acquisition, leasing and development. He also has experience in equity financing, mortgage backed securitization, mortgage, and mezzanine and subordinate loan origination. He has published several articles regarding real estate, structured finance, commercial lending, and loan enforcement, and often lectures to attorney and industry groups regarding real estate, lending and loan enforcement topics. Mr. Dickey’s experience includes working with lenders, developers, investors and business owners on all aspects of real estate transactions, including mortgage and mezzanine loan origination and enforcement, CMBS lending, mortgage backed securitization, construction finance, development finance and loan workouts, modifications and extensions.

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Description

Commercial property can be considered distressed for a variety of reasons. It might fail to generate sufficient cash flow to pay for operations and debt service. It might have become obsolete for its original purpose, experienced environmental contamination, or been subject to lawsuits, liens, building or zoning violations, or deteriorating relationships among existing owners. These issues could result in loan default or bankruptcy for the borrower.

Opportunistic investors must navigate the issues and determine the value of the property, and either negotiate a reworked loan with the existing lender or obtain new financing to purchase the property and retire the existing debt. Conventional mortgage financing might be unavailable, so new funding might be in the form of a joint venture or financing from a hard money or bridge lender to obtain permanent financing once the property is stabilized.

Due diligence of the collateral is critical to a successful transaction. The purchaser must examine the title, zoning, building code, environmental and other property-level issues, and identify expenses and impediments (receiverships, ongoing lawsuits) to taking control of the property. The purchase and sale agreement (if any) should include enhanced reps and warranties addressing such matters.

If the borrower is already in bankruptcy or receivership, the purchase may occur as part of a 363 sale or a court-approved sale by the receiver. Financing should be committed upfront, and the lender may need to participate in the transaction as an effective partner of the buyer. The parties must confirm that the property can be freely transferred and that existing claims against the property will be discharged.

Listen as our authoritative panel discusses the nuances of purchasing and financing distressed commercial real estate.

Outline

  1. Distressed real estate in the current market: economic and other causes
  2. Evaluating distressed real estate
    1. Due diligence
    2. Determining cost to "cure" physical, legal, and regulatory issues
  3. Purchase and sale agreement: key buyer protection provisions
  4. Financing options: conventional and bridge loans, private equity investment
  5. Purchasing property in 363 sale
  6. Purchasing property out of receivership

Benefits

The panel will review these and other vital issues:

  • What factors can cause a property to be considered distressed, and how can they be identified?
  • How should a prospective lender determine the value of a distressed property, considering any issues presented?
  • What are the immediate financing options for an opportunistic investor? The longer-term options?
  • When might the purchase of an existing loan be preferable to acquiring the property?
  • Before bidding at a 363 or receivership sale, what issues should be considered upfront?