Dated: June 21 2013

Views: 2009

Because of the ongoing financial liquidity crisis, or despite it, now can be a great time to negotiate a troubled commercial real estate loan, especially with such nontraditional sources as hedge funds.

Here are some tips for making your renegotiation successful from Edward Mermelstein, a veteran real estate attorney and founder of the law firm Edward A. Mermelstein & Associates in New York.
  1. Have a sense of how much pressure the lender is facing from other defaults. A bank that can’t afford another default on its books may be more flexible.
  2. Have the hard numbers ready. Be able to show why the property isn’t or soon won’t be able to cover mortgage payments. For example, if you have a major tenant that is planning not to renew or asking for a major rent concession, the property’s current cash flows may no longer be adequate to cover debt service.
  3. Have an understanding of whom you’re negotiating with. Find out what other loan modifications the lender has done recently. Most modifications thus far have been in the 10 percent to 20 percent range, says Mermelstein.
  4. Have a smaller loan amount. Loans under $100 million are less likely to be split too many ways, making them easier to renegotiate.
  5. Have another lender on deck. A lender is much more likely to negotiate a write down if you offer another lender who’ll take over the reduced loan. Lenders want to be paid off rather than turn debt into a rollover.

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