A/B Loan Bifurcation – Arizona Retail Center

A/B Loan Bifurcation – Arizona Retail Center

A/B Loan Bifurcation

 

Property: Retail Center in Arizona Loan Balance: $47 million

 

Problem: Large vacancies put this borrower’s loan at risk. The loan was originated in 2007, and the current value of the property was $18 million. There was some likelihood that the value would recover by maturity in 2017.

 

Solution: In this situation, the loan was bifurcated into an A/B structure with an A note of $18 million. The borrower contributed significant capital toward future TI, LC needs. The B note was equal to the remainder of loan (hope note) with no interest accrual.

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January 14, 2014