It’s no secret that before COVID-19 was a household name, the economy was white hot. The un-employment rate was at an all time low, people were buying houses, going on vacations and investing. In a matter of months that has all come to a screeching stop. The United States economy is now filled with uncertainty, investors and businesses are watching to see when things will ‘return to normal’.
In the last 40 years the United States has seen 3 major recessions and a few smaller ones. The current economic conditions and unease brought on by the Coronavirus could very well land us in our 4th.
So, what can we do about it?
One option for commercial real estate owners and developers is a loan workout. A loan workout is when a lender is working with a borrower to get monetary or technical issue resolved. In order to successfully set up a workout with you lender here are a few basic steps to follow:
Approach your lender before any major complications arise with a detailed plan of what changes you need to make and how you plan to follow them. It’s a good idea to back this up with financial statements showing that you are able to deliver on this new promise.
Consider all aspects of the loan when you negotiate. A private lender can be much more flexible than a bank due to regulations they must follow but a few things to consider are length of term, payment schedule, interest rates and technical loan covenants.
Get it in writing! Make sure any detail that is changed, no matter how small is changed in the contract and reviewed by an attorney before the borrow signs. This will protect both the lender and the borrower to make sure the new terms are fully understood and legally sound.
If this is something you would like to look into or get more information on regarding your commercial real estate than it is a good idea to reach out to an experienced broker to help guide you through this process. John J. Godwin from Marcus & Millichap has been in the commercial real estate business for over 30 years and has fought through the ups and downs of the economy. He has worked through 3 separate economic downturns including the RTC (Resolution Trust Corporation) Disbandment, the dot-com bubble and the most recent being the Great Recession. John has worked with both lenders and borrowers during these times to create workouts that help all parties at the table continue to move forward and maneuver these uncertain times.
John’s expertise combined with the resources and connections from Marcus & Millichap, the largest national commercial real estate brokerage, gives you the strongest possible starting point. Marcus & Millichap specializes in real estate investment services with more than 2000 investment sales and financing professionals in over 80 offices thorough the United States and Canada.
If you are looking for a broker opinion of value please reach out and let John him use his expertise to help you out.
Source:
ccim.com [Article] https://www.ccim.com/cire-magazine/articles/making-it-work/?gmSsoPc=1
distressedpro.com [Article] https://www.distressedpro.com/how-to-workout-distressed-commercial-real-estate-loans/