In response to lender complaints of inconsistent policies and unclear guidance re loan restructurings, the FDIC and other major bank regulators issued a joint "Policy Statement on Prudent Commercial Real Estate Loan Workouts" on October 30th. It provides further guidance to lenders and examiners working with "commercial real estate borrowers experiencing diminished operating cash flows, depreciated collateral values, or prolonged sales and rental absorption periods" (isn't that all borrowers?). To date, Lenders have been altogether constipated in their approach to loan workouts; mainly for fear of taking actions which might unnecessarily result adverse classification of loans and the negative accounting and reserve requirements which follow. Hopefully this fresh guidance will give them some confidence to be more responsive to borrower needs.  The Statement provides that loans will not be adversely classified solely because the loan balance is more than the value of the underlying collateral. It assures lenders that restructurings which follow a "comprehensive review of a borrower's financial condition" will not be criticized by examiners even if the restructured loans have to be partially or wholly reclassified adversely. Greater detailed examination of the borrower and guarantor's global financial condition and repayment capacity are emphasized. Flexibility is given to lenders with regard to assessing collateral's value depending on the situation; for example, if the workout contemplates working with the borrower through a delayed construction and lease up period then the property can be given an "as complete" or "as stabilized" value. Some example loan workouts attached to the Statement are definitely worth reviewing.

 http://www.fdic.gov/news/news/financial/2009/fil09061a1.pdf   

 

We've been providing added value to our tenant clients by introducing them to great brokers who provide us with the latest market information. After a few informal joint engagements, Scott Silver has joined forces with Scott Tiano and Geoff Tranchina of Wilson Commercial in a new initiative to offer legal and brokerage services to retail tenants. Retail Lease Advisors provides a platform for struggling tenants to access legal assistance on a contingent fee basis with the added value of brokerage services. We've helped many stores and restaurants find common ground with their landlord to keep them open for business. Landlords appreciate the professionalism we bring to the process and the education we provide our tenant clients results in greater long term performance under rent relief agreements.

http://www.retailleaseadvisors.com

 

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