NUTS & BOLTS
LOAN WORKOUTS
We CanWork It Out A ‘FROTHY’ MARKET IS SIGNALING THE NEED FOR MORE BANK-LOAN WORKOUTS. LUCKILY, THE OPTIONS FOR REAL ESTATE DEVELOPER- AND INVESTOR-BORROWERS ARE INCREASING, AS WELL.
by Michael Ciaburri
I
currence can take solace in the fact that, in recent years, numer- ous professionals have entered the marketplace to compete with attorneys offering bank workout services. These individuals often are former commercial bankers with hands-on experience negotiating bank workouts with real estate professionals from the other side of the table. Typically, this individual, despite not being an attorney, has a working knowledge of both FDIC and other banking laws and also has tremendous insight of the inner workings of how a special assets department of a bank operates. This knowledge gives the workout specialist a distinct competitive advantage over an attorney. Although the attorney probably has a solid grasp of banking law, he or she likely does not have the hands-on, day-to-
n the past, real estate developers and investors negotiating a workout on an outstanding bank loan would seek the assistance of an attorney. In cases where the bank and the borrow- er’s attorney failed to come to an agreement, the borrower not only was obligated to pay a sizable legal bill, but came away without any financial relief from the bank, as well. This scenario is all too common in bank workout circles, and for the borrower, it permeates a situation in which he or she is “throwing good money after bad.” The attorney representing the borrower is in a “no lose” position in that the legal bill is going to be paid whether or not there is added value for the client through some sort of compromise with the bank. Real estate professionals who have experienced such an oc-
86 | think realty magazine | mar :: apr 2016
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