Shlomo in Thirty

No, I’m not suggesting that you always feed a property, and certainly not without a strategy.

But here’s three things you need to know about special servicers

 0. The lender must address major loan issues
 0. If you are not in default, they have no choice but to be constructive
 0. If you do default (often without knowing), you lose almost all your leverage.

The key is to use the lenders rigidity in your favor. This is not an overnight play nor is it for the faint of heart. It’ll probably the most complex negotiation in which you’ll ever participate.

The devil didn’t really go down to Georgia, it’s right there in the trap language in your loan docs.

Even the most skilled attorneys will have a hard time convincing lenders counsel to remove such language - and for their client to kill a deal over it because it’s well hidden and the money is just way too seductive. 

Carl Icahn just filed a lawsuit that exposes how CMBS works behind the scenes. Every real estate borrower and counsel needs to read this cover to cover.

Amazon video, Netflix, Hulu, Disney Plus and so many more of these streaming services make it easy to stay home to skip the theater. 

Traditionally, theaters were really solid rent payers as expensive buildout costs are amortized into the lease. Furthermore, many of these theaters take up upper floors, paying far beyond what a replacement  tenant, if it exists, would pay.

Some of the most dynamic properties boast theaters, and along with mall cotenancy issues, are one of the biggest threats to the retail real estate today.

We recently took the family to Disney where the have this stiff dog leash with presumably an invisible dog at the end. People were petting it, and I even saw somebody run away from this imaginary dog.

Cryptocurrency, unprofitable futuristic businesses and many others dream are being crushed by the market. In the crossfire, solid assets are getting hurt. This is an amazing opportunity to pounce and get aggressive.

Oh, you want a formula?? well, if I had that, I wouldn’t be recording videos, would I?

Given the fast moving changes brought on by technological innovation and venture driven valuations landlords can no longer rely on all traditional metrics in assessing a tenant. 
 
The term Billion dollar valuation has practically lost its meaning. Delivering a tube of toothpaste in 15 minutes?? Is that a viable business? 
 
Yeah, a lender may finance it, but unless you strategy is to shift risk via non-recourse debt it's time to roll up the sleeves and learn your tenants businesses and their future potential

Nine years before WWI broke out, Field Marshal Alfred von Schlieffen developed the plan to invade France with a six week war. The movements were planned to the day and allowed for various contingencies but one, the unknown. The war lasted four years

Over a century later, CMBS still hasn’t applied this lesson. Trusts are rigid and asset managers are not empowered to be creative and therefore follow a strict game plan.

Amongst other things, this contributes to outsized unnecessary losses to bondholders and Borrowers alike.

What are you doing to expand your retail tenant base?
While proving physical retail relevancy, we’ve forgotten that the consumer voted against many of our tenants. The ones they voted for, however, they often lack the credit or even know-how to get into retail. 

So, what do you do? There are steps to make it easier for Digital Brands entrance to retail. A good start is recognizing that national may fill space, but Digitals Brands bring excitement and customers. Without excitement, all you have is a property that once upon a time was hot.

The Cash Management waterfall is often structured to pay interest before property expenses. If cash flow deteriorates, the loan can remain monetarily current for months, while in non-monetary default because bills aren’t being paid. Be careful, if a vendor places a lien, or if the property decays from a lack of maintenance - your supposed non recourse loan is now at least partially recourse. Whats the point- negotiate your terms with the guy trying to sell you the loan - at the term sheet level. It can be the difference between success and failure.

Welcome to my new feature- Shlomo in Thirty. 

In 30-seconds I'll share inspiration and guidance on topics such as real estate, finance, debt restructuring and reinventing retail. A bit about me, in 2003 started my career in a sector that ultimately became known as PropTech. Since then I've been investing in commercial real estate and restructuring complex loans. In 2021 I was granted my first patent for the reinvention of the shopping center and ecommerce. email me with any questions - [email protected]