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Case Study: A/B Note Structure – CMBS

 

Situation:

  • 285,000 square feet of anchored retail in West Palm Beach, FL
  • Discount retail, 20% vacancy, 62% rollover in 12-24 months with significant decline in rents.
  • 2007 origination, 2017 maturity, second generation restructure.
  • $37.5MM loan

Consideration & Solution:

  • Borrower engaged Hart Advisors Group to restructure the loan with the special servicer for the second time in three years.
  • Hart Advisors Group completed an independent assessment, mindful of new covenants for stipulated receivership and immediate foreclosure upon default.
  • On behalf of the Borrower, Hart Advisors Group discussed all pending and future issues impacting value including impact of the co-tenancy clauses, rent reductions and concessions, renewal likelihood of the current tenants, stabilization and market conditions.
  • Due to the size of the loan and potential loss to the Bondholder/Lender, an A/B structure was the most viable.
  • Structure include discounting the loan to 50% of the unpaid principal balance, 5% principal pay down of the A note, $500K in new reserves, and a reduction in interest rate by 50%.

 

RESULTS

Negotiated an A/B structure for a previously modified loan, 50% debt and interest rate reduction.

 

 

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