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Avoiding a Receiver Learn from a leading a2orney ways to maintain control of your cash and avoid a receiver
Speakers
James Gilbert
Webinar -‐ Avoiding a Receiver
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Brock Andrus
Ann Hambly
Get Your Team in Order
l Legal Counsel
l Advocate
l Leasing Agent
l Tax Advisor
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Speaking: Ann Hambly
How to Avoid a Receiver
l Remit all net cash monthly
l Provide detailed accounLng
l Provide leasing update
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Speaking: Brock Andrus
How to Avoid a Receiver (cont.)
l Have a viable workout plan l This is where your advocate will help
l Provide a capital improvement budget and plan
l Be sure you have the right team l On-‐site manager l Local leasing team
l Don’t incur expenses that have not been customary over the course of the loan
l Always communicate and be fully transparent
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Speaking: Brock Andrus
There May Be Times It’s in Your Best Interest to Have a Receiver
l No intenLon of trying to execute on a workout l Would rather hand in the keys
l Management of the asset is in disarray due to partnership in-‐fighLng
l Significant cash shorXalls, represenLng exposure on real estate taxes and insurance l Possible bad-‐boy carve-‐out issues for guarantor if not paid
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Speaking: Brock Andrus
Loan Documents
l Loan documents are wri2en by lenders and have favorable terms for lenders l But don’t worry – a judge will decide
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Speaking: James Gilbert
Loan Documents (cont.)
l Some loan documents may impose steps which must be followed either before a default can be declared or before a receiver can be appointed l For Example:
l A default shall occur if the borrower fails to pay scheduled payment of principal, interest, or other monies due under the note or other loan documents on the date any such amount is due following any applicable grace period and following noLce from the lender
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Speaking: James Gilbert
Loan Documents (cont.)
l Loan documents typically say that in the event of a default, the borrower freely consents to the appointment of a receiver without noLce l For Example:
l Upon, or at any Lme prior or aber, iniLaLng the exercise of any power of sale, insLtuLng any judicial foreclosure or insLtuLng any other foreclosure of the liens and security interests provided for herein or any other legal proceedings hereunder, make applicaLon to a court of competent jurisdicLon for appointment of a receiver as a ma2er of strict right and without noLce Grantor, and Grantor does hereby irrevocably consent to such an appointment, waive any and all noLce of and defenses to such appointment and agree not to oppose any applicaLon therefor by Beneficiary, but nothing herein is to be construed to deprive beneficiary of any other right
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Speaking: James Gilbert
Keeping the Receiver at Bay
l A receiver is very expensive l With a receiver, the rents are being depleted to pay not only for a management company but also a
receiver
l The default was not the fault of the borrower l Large tenant unexpectedly filed bankruptcy
l All NOI is being paid to the lender l Have financial reports showing all income and expenses
l Suggest a TRO (temporary restraining order) or preliminary injuncLon as an alternaLve to a receiver
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Keeping the Receiver at Bay (cont.)
l Request a conLnuance of the hearing l Ask the lender l Ask the court l This will give Lme to further advance your turn-‐around plan or will give you Lme to get your game plan into
gear
l Describe the borrower’s turn-‐around plan to the court in detail l The borrower is far more likely to carry this out than a receiver who will be focused on a foreclosure
l A2ack the proposed receiver l Review his declaraLon and resume carefully, for example;
l the receiver’s office is far away from the subject property
l The owner/manager is close by and be2er able to show the property, address tenant’s concerns, etc. l The receiver is a generalist and is not as experienced with this type of property and the specific tenant s as is the borrower
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Keeping the Receiver at Bay (cont.)
l A receiver is a significant change l The appointment of a receiver will upset exisLng tenants making them more likely to vacate the property,
Since they face the daunLng prospect of; l A receiver
l A potenLal foreclosure
l An unknown new owner
l Post foreclosure, etc.
l May make new tenants less likely to sign lease a lease l Which will frustrate the borrower’s successful turn-‐around plan
l Making the foreclosure a foregone conclusion
l A2ack the lender’s evidence l Is this a loan that was paid off?
l Discuss borrower’s track record and experience Webinar -‐ Avoiding a Receiver
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Contact InformaLon
Ann Hambly
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Ann Hambly created 1st Service SoluLons in 2005 recognizing the need for a borrower advocate in commercial real estate, literally invenLng the borrower advocate space in commercial real estate. Hambly has over 30 years of commercial real estate servicing experience and has served as the CEO of servicing for PrudenLal, Bank of New York, Nomura, and Bank of America. In 2013, she was awarded the honor of Top 10 most DisLnguished Women in Real Estate. She was chosen for this award for her significant and noteworthy achievements in the field of mortgage finance by the Mortgage Bankers AssociaLon. Ann was named a Legend in real estate in 2013 by Real Estate Forum. In 2011, she was recognized as one of the Most InfluenLal Women in commercial real estate by NaLonal Real Estate Investor. Ann was awarded Woman of Influence by Real Estate Forum in 2010. She has been at the forefront of seong industry standards for commercial real estate and has led many iniLaLves for industry groups which included a2orneys, raLng agencies, master and special servicers, trustees, and bondholders. Hambly is highly sought aber as a featured speaker in the CMBS industry. Ann has led CLE courses for a2orneys and has been a featured speaker for groups as large as 4,000. In 2012 she gave a presentaLon to the Federal Reserve Bank of Atlanta about some of the problems in the CMBS industry and commercial real estate in general. She is also a frequent author of arLcles for publicaLons like Wall Street Journal, France, Sco2sman Guide, Globe Street, RE Business, Hotel News Now, and others. Hambly was the Chair of the Commercial Board of the MBA in 2003; the first woman to hold this posiLon. In that role, she had the opportunity to present industry changing events to the House of RepresentaLves, Congress and other leaders in our NaLon. She has served on the presLgious Real Estate Roundtable and the NAIOP Capital Markets
(817) 756-‐7227 [email protected]
Contact InformaLon
Brock Andrus
Webinar -‐ Avoiding a Receiver
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Brock Andrus is Managing Partner at 1st Service SoluLons. With 15 years of experience in the real estate and private equity industries, Andrus has held posiLons at various real estate companies, including FINOVA Realty Capital, Bridge Realty Capital, and Partners Group USA, as well as developed a proprietary residenLal lending product. He also has significant experience in the financial services industry, having opened the U.S. office of a Swiss-‐based private equity group with partners of the firm, and founded a private equity advisory firm. Andrus uses his combined experience in financing and porXolio management to analyze, negoLate and recommend servicing acLons affecLng collateral value of loan assets.
(817) 756-‐7227 [email protected]
Contact InformaLon
James Gilbert
Webinar -‐ Avoiding a Receiver
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James Gilbert is an a2orney with over 20 years of experience. He started his legal career working for two large, mulLnaLonal law firms, Fulbright & Jaworski and Akin, Gump, Strauss, Hauer & Feld where he represented lenders and special servicers in connecLon with acLons for judicial foreclosure, receiverships and claims related to loan originaLons and unfair lending pracLces. He has brought his pracLce to a mid-‐sized law firm (Steckbauer Weinhart, LLP) and represents commercial borrowers in the defense of acLons brought by lenders throughout the State of California. He has successfully opposed numerous receiverships and recently obtained an injuncLon prohibiLng a lender from foreclosing, which forced the lender into a se2lement on terms parLcularly favorable to the borrower. He has also se2led numerous disputes with lenders without having to resort to liLgaLon. As a former receivership lawyer on the side of the banks, he offers a unique perspecLve to borrowers. Mr. Gilbert pracLces throughout the State of California. In addiLon, Mr. Gilbert has been admi2ed to liLgate lending disputes on a pro hac vice basis in a variety of other states.
(213) 229-‐2868 [email protected]
