Pivot Points Newsletter: February 2023

1/31/2023 Updates from CohnReznick's Restructuring and Dispute Resolution team

Receive and explore monthly insights from our Restructuring & Dispute Resolution team

Navigating distress in commercial and multifamily real estate

More than a decade has passed since the Great Recession
of 2008, the Dodd-Frank Act of 2010, and the economic recovery that
followed beginning in 2012. In this article we provide a brief overview of debt
restructuring conditions impacting Commercial Mortgaged-Back Securities (CMBS),
discuss the importance of building a feasible business plan, and outline
critical components of a successful real estate workout including maintaining
an open dialogue between borrowers and secured lenders to help navigate
distressed debt in the commercial and multifamily real estate space.

Q&A: Tips for a distressed real estate market

In this Q&A, Debra Morgan, Managing Director of the
Restructuring and Dispute Resolution Practice at CohnReznick, provides some
tips for how those in the real estate market can navigate an economic downturn
and a distressed market.

Student Housing

Background: During COVID-19, when students were sent home and learning was moved online, a student housing community experienced crime, occupancy decline, and liquidity constraints. As a result, the organization needed a capital injection for repairs and operations. The maturing bridge loan contained extension options and the covenant conditions could not be met by the property.

Our Role: Advisor

Results:

Negotiated covenant waivers
Reduced fees for the extension of the maturity date, incentivizing the sponsor’s new equity injection for repairs
Changed property management and stabilized the property through the 2021-2022 school year
Generated covenant and fee concessions that allowed the sponsor to forgo a $7M+ capital call
Stabilized property was positioned for sale and the loan was retired in 2022

Specialty Office

Background: An owner-occupied office building had been financed with bank debt and very low leverage prior to securing a third-party lease for the entire building. With the lease, the owner wanted to maximize the value of the building and refinance the bank loan.

Our Role: Advisor

Results:

Identified a new financing source to retire the full-recourse bank loan with a higher loan to value and non-recourse debt, allowing the owners to monetize part of their equity. After a year of lease seasoning, the building was sold, and the owners were able to fully realize their investment and ~$1M ROI.

Chain of Fitness Clubs

Our role: Retained by the chapter 7 trustee to perform insolvency and valuation analysis for litigation support of various recovery actions.

Beach, Golf, and Yacht Resort Community

Our role: Conducted a forensic investigation of financial reporting and management services that were provided by a third party.

Vitamin Company

Our role: Served as financial advisor in chapter 11 bankruptcy. We prepared a new business plan with detailed financial projections and managed negotiations and settlement of claims against the Debtor’s estate.

Webinar: Considerations for creating shareholder value in a volatile market

CohnReznick, Winston & Strawn, and SPAC Insider hosted the webinar “Considerations for Creating Shareholder Value in a Volatile Market” which discussed the challenges that public companies, and those considering a public company transaction, must address to be successful in the current market.

Watch the recording and learn more about the current trends of rising interest rates and inflationary cost increases, as well as other trends, that have imposed downward pressures on publicly traded equity prices, especially for businesses that became publicly traded via a de-SPAC merger.

Watch now

Congratulations to Chris Creger who was recognized as a Rising Star Dealmaker by Global M&A Network. The award honors exceptional young dealmakers from the North and South American private equity, growth investing, lending, M&A, and restructuring transactional communities for their achievements, dedication, and talents for closing value-creating transactions.

ACG New York DealMakers Dinner Series (Feb. 9) – Speaking/Attending

12th Annual Distressed Forum for Bank Special Assets (East) (Feb. 14-15) – Attending

Structured Finance Association SFVegas 2023 (Feb. 26 – Mar. 1) – Attending

McGuireWoods’ 19^th Annual Healthcare Private Equity and Finance Conference (Mar. 1-2) – Speaking/Attending

National Real Estate Women’s Forum (Mar. 2) – Speaking/Attending

2023 ACG Texas Capital Connection (Mar. 7-8) – Attending

IWIRC's 20th Annual Spring Conference (Apr. 19-20) - Attending

ABI Annual Spring Meeting (Apr. 20-22) – Attending

ABI VALCON 2023 (May 1-3) – Attending

Related Services

_{This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.}