This week Chris sits down with Shlomo Chopp, Founder of Case Equity Partners. His job is helping real estate owners get out of or restructure loans they can't pay.
Shlomo got into this after an attorney told him to read the CMBS loan documents, and he read them cover to cover. Today his clients range from owners with a couple million dollars of debt to an $800 million capital stack.
They get into what is actually in a modern loan document, and what a borrower should do before the lender starts looking.
They discuss:
• Why 2008 did not play out like the savings and loan crisis
• How a non-recourse loan turns into full recourse
• How a payment due on a holiday can lock up your cash
• How to study your loan documents before the next deal
• Why an underwater property is the borrower's biggest leverage
• Why Shlomo thinks the worst has already happened
• Where Shlomo would put $50 million today
Timestamps:
(00:00) Intro
(01:03) Why the Savings and Loan Playbook Failed in 2008
(08:18) How Loan Documents Got Tougher After 2008
(16:12) Why You Should Model Every Clause in Your Loan Documents
(22:16) Which Lenders Hide Full Recourse in the Fine Print
(25:21) How to Learn and Negotiate Your Loan Documents
(32:18) What's Usually Gone Wrong by the Time a Borrower Calls
(39:54) A Borrower's Leverage in a Loan Workout
(44:09) Restructuring a Loan When You're Out of Cash
(49:36) The Game Theory of Negotiating With Your Lender
(53:14) A Good Operator Is Not the Same as a Good GP
(54:53) Why Office and Multifamily Are Seeing the Most Distress
(1:01:17) How Lenders' View of Office Has Shifted
(1:03:26) Why the Worst of the Distress Is Already Here
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