Restructuring Advisory

Former lenders negotiating on your behalf


Market-leading investment advisory services to real estate owners under financial strain.

Restructuring Advisory


The Loan Restructuring & Workout Group at Lotus is a market leading specialist team dedicated to helping our borrower clients negotiate with their lenders and CMBS servicers. As one of the most active Loan Restructuring firms in the country we offer our clients the necessary market knowledge, structuring capabilities, and strong lending relationships required to achieve great outcomes.

We know that interpreting the constantly shifting capital markets and uncertain economic climate is daunting, complex, and time consuming for any real estate owner. At the same time we recognize that most borrowers do not have the full suite of resources or the experience to navigate the opaque world of loan restructurings, especially on the CMBS side. Our job is to support our clients preciously that expertise. Crucial to our success is a comprehensive understanding of what makes lenders ‘tick’, including which set of circumstances best leads all parties to an amicable resolution. Our confidence in finding optimal resolutions for our clients is borne of the belief that our reputation as trusted advisors who understand both borrower and lender’s primal needs, is unassailable.

Why we're different

Lending Veterans & Loan Restructurers

Our team is comprised of industry veterans who can leverage an lifetime of experience navigating through complex loan situations with respect to workouts and structuring

Understanding What Makes Lenders Tick

We have first-hand knowledge of what lenders need to hear and see in order to run through their decision trees so that both all parties get to an mutually acceptable agreement.

Clients Come First

Our team will provide the tireless diligence and hard work needed to restructure your loan; this complex process takes months to materialize

Moral Authority & Market Credibility

We maintain an unassailable moral authority and market credibility in the CMBS world, driven by the reputation of our Managing Partner who previously headed various CMBS businesses. The reputation of our work product ranging from the quality of our ‘hardship letters’ to the depth and transparency of our process often leads to strong outcomes for our clients.

--- Loan Modification Expertise ---

Modifications / Releases

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Escrow &
Reserve Relief

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Maturity
Extension

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Modification of Prepayment

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Rate
Reduction

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Guaranty /
Covenant Relief

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Deeds-in-Lieu


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Negotiating a hand back of an asset in exchange to be relieved of guaranty’s, liabilities, and any “surprise” bills

Discounted Payoffs/Recaps


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Negotiating the discouting pay-off of loans where the value of the asset is below the debt and the lenders agree to the most optimal outcome maximizing recovery to their investors is to sell the debt back to their investors

Debt Subordination (A/B Notes / “Hope Notes”)


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A situation in which we can secure a forgiveness of an amount of principal that ties loan balance to the current appraised value of the asset and the lender only recoups the remaining principal balance should the property be sold for more.

Forbearance Agreement


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To reduce the out-of-pocket expenses our clients incur to keep their properties operational. We successfully secure P&I holidays, and negotiate the reduction of special servicing fees, late fees, and default interest

--- Our negotiated outcomes ---

We secure results

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LOTUS

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Controlling Class Member

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Lender

01 - Performing

You are current on your loan payments and all is well.

Leveraging our loan restructuring expertise to deliver optimal results for you

Our process

Understand Client Objectives


  • Meet with client to understand the underlying asset, origin of restructuring needs, and the desired result
  • Provide relevant insights on the current restructuring landscape
  • Analyze data to create and present preliminary layouts of available options

Chart Strategy


  • Work with the client on a consistent basis to strategize and outlay reasonable objective
  • Formulate pitch to existing lenders, master servicers, and special servicers
  • Establish timelines, key milestones, and desired solutions and an create in-depth hardship case to achieve the intended resolution

Engage with Relevant Lending Parties


  • Manage information flow, run the process, and advocate, advocate, advocate
  • Leverage expertise and longstanding relationships with lenders, controlling class holders, and servicers as needed
  • Pitch relevant parties and effectively communicate borrower's objectives to achieve the most optimal outcome

Finalize Actionable Solutions


  • Negotiate material terms on client's behalf, forge consensus, paper a settlement document
  • Post-closing - Maintain client relationships and address follow-up issues during a transition process”

"Faisal brings to real estate advisory the formidable experience of having headed a successful CMBS business. His clients gain a unique advantage from his capital markets mentality and deal structuring expertise."

-Jerry Tang, Head of CMBS, Natixis

"Faisal has worked extensively on the lending side himself, and I think he understood our perspective as a private lender in terms of what was required to make the deal go."

-Richard Mack, Co-Founder, Mack Real Estate Credit Strategies

"It became apparent to us that Faisal has some of the strongest corner-office relationships in the business. We like to borrow money on a top-down basis. We like to deal with principals, and Faisal was able to connect us with people that gave us a great comfort level"

-Mark Gensheimer, Founder & President | Penn-Florida Companies

"He serves, in my mind, as a consigliere to the groups that he works with. He's very selective in the assignments he takes and doesn't chase high volume. That way, he can give personalized attention to each of these clients... To me, from a client perspective, he is the easy choice when you get to understand the breadth of solutions that he offers."

-Brian Sedrish, Managing Director | Related Fund Management

"When Faisal brings something to us, it's something that he knows fits because he has been on our side and he understands what works and what doesn't. None of us have enough time in our days... Any advisor who can reduce that amount of time and refocus you to things where your hit rate is higher is a valuable advisor to us."

-Jeff DiModica, President | Starwood Property Trust, parent company of LNR

Testimonials

Our Monthly Newsletter

FAQs

• Breaking escrows and utilizing tenant deposits to pay for operating expense shortfalls. • The deferring of interest payments in exchange for a sponsor guaranty to fund operating expenses, followed by a restructuring of the cash management so there is a trap in place to get the lender whole on their deferred interest. • Tapping into FF&E Reserves to pay for OpEx and Debt Service. • Utilizing the government funded PPP loan program to fund shortfalls and debt service at the property. • Suspension of various covenants such as waivers for closed businesses and financial covenants such as extensions and cash flow tests. • Extensions of a maturity date and a re-writing of the covenants in exchange for some paydown. • A deed-in-lieu in exchange for a nominal payment to go away or an upside participation in the property. This is happening in jurisdictions where it’s harder to foreclose and the sponsor still has leverage in that regard. • On the CMBS side, an interesting one is securing a modification, including in some instances a payment modification under a unique option called a ‘referred’ loan. This is a case where the loan can be referred to the special servicer for more in-depth consultations without technically being in special servicing and incurring those fees. Many borrowers are surprised this option exists.

That’s a great question. I think a few forces will drive the hot spots for distressed debt. First, any asset class where consumer demand is moving in the opposite direction of what the offering is at the real estate level will continue its terminal decline. That means, in those instances, LTV’s only have one way to go. That is fundamentally what’s happening to retail. Years of poor balance sheets (with both corporate tenants and the mom and pops), declining sales, and an uneasy feeling that you’re working for the landlord will continue to feed discontent between tenant and landlord, and then onto landlord and lender. We are advising on a few mixed-use deals where weak collections on the retail components is the reason the deal is under a 1.0x DSCR.

Hotels are a different animal. On a fundamental level, they will remain sound businesses since we’re all social animals by nature who want to continue to travel and crave time away from work (that is, not in our homes!) But the near-term issue is that hotels are notoriously expensive to run. They drive anywhere from 15-25% operating margins to the bottom line if everything is going right. But a 10-20% decline in RevPAR (rate times occupancy) can have owners feeding the assets out of pocket. Now imagine 0% occupancy. At, say, 50% occupancy in 2021, we’ll probably see hotel sponsors needing to put capital into their assets, either at the behest of their lenders or because the asset requires it. We think it won’t be easy to invest capital when you have a 65% LTV loan and you see fundamental residual values down 10-20%.

Some might say some borrowers are more difficult than others also. People are people. Currently, we are working across the board with CMBS servicers, debt funds and banks, and I can say that so far everyone is behaving predictably and working cooperatively. That doesn’t mean that we aren’t having difficult conversations. Banks are more lenient, but that makes sense because of certain protections and allowances that are being afforded to them by the federal government. CMBS servicers are largely owned by private equity funds, and they have an obligation to their owners and to the bondholders they represent, so they too are being predicable.

Yes, forbearance agreements are definitely the topic de jour. We are in the middle of a few, and it’s clear to us that one size doesn’t fit all. Some are as simple as 90 days of interest deferrals in exchange for the sponsor’s guaranty that they will carry operating expenses at the property. Others are far more complicated, with half a dozen other variables on the table, each of which has a ‘bid’ and an ‘ask’. But stepping back, we are predicting that by the time we get to the other side of the summer, many deals will enter either a second round of forbearance or far deeper levels of restructuring surgeries. I also sense that in many of those instances, both borrowers and lenders will begin asking themselves primal questions about more drastic measures. We expect to see uncured defaults, bankruptcies, notes sales, and foreclosures picking up in the fall should court systems open back up and the economy remain muffled.

You mean other than hiring us? Away from any strategic advice designed for each unique situation, I’d borrow an expression from Michael Bloomberg: ‘In God we Trust. Everybody else must bring data’. Start by understanding that lenders, especially CMBS servicers, are custodians of other people’s money. They are very insecure about what they know to be happening at the property and borrower level during times of distress. We recommend that borrower’s clearly organize the nature of their ask, tell lenders what steps they are taking to preserve value at the property, enclose relevant and current financial information, provide specific support such as correspondence with tenants proving issues – in a chart if possible, and prove out the solutions to initiatives they are taking to get ahead of specific issues. In a nutshell, the probability of a lender accommodating your needs goes way up when it starts with an organized, thoughtful, data-driven approach. There is no getting around the difficult conversations that are sure to happen, but this is a game of inches and securing gains starts with Mayor Bloomberg’s mantra.

I would say a couple of things, all of which are marginal or complete differentiators. Restructuring advisory starts with knowing what makes lenders ‘tick’, which we find central to forging the best compromises. I’ve spent close to 20 years underwriting, structuring, and working out loans while working as a lender and have first-hand experience with tackling problems and solutions from the inside. Others at Lotus embody the same core strength, and we are now bringing those decades of experience to add strength to our borrower clients. I think coming from the lending sector also provides us with some level of moral authority and market credibility in front of lenders since we share a background. As we have found out, a common background helps everyone see a little more clear-eyed as to where the areas of alignment are between a borrower’s ‘ask’ and a lender’s or a servicer’s ‘give’. Lastly, I’d say what we’re most proud of is our ‘solutions’. We’ve built one of the fastest-growing capital advisors in the country by using a ‘solutions’-based approach over traditional relationship banking or brokerage. It forces us – to a sponsor’s delight – to be quicker with numbers, more innovative with the structuring, and altogether more thoughtful with the solutions package.