CASE STUDY: A/B Note Structure – CMBS
285,000 square feet of anchored retail in West Palm Beach, FL
Discount retail, 20% vacancy, 62% rollover in 12-24 months with a significant decline in rents.
2007 origination, 2017 maturity, second-generation restructure.
Consideration & Solution:
The 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 the 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.
The structure includes discounting the loan to 50% of the unpaid principal balance, 5% principal paydown 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.