Discounted Payoff

Industrial Building in California

Industrial Building in California

Industrial Property in California suffering from low occupancy and declining rents due to lack of tenant demand in the subject market.

Result:  DPO 


Deal of the Month

Principal Balance of Loan:
$13MM

Appraisal as of 2nd Q 2015:
$8MM

Originated:
October 2005

Maturity date:
October 2015

Closing Month:
August 2015


Challenge

The Property was suffering from low occupancy and declining rents due to lack of tenant demand in the subject market. The result was distressed cash flow and an overall value that was significantly declining. As the loan was scheduled to mature in late 2015, there was not enough term left on the loan to allow for sufficient time to stabilize the property through lease up. Even if the borrower was able to add occupancy to the property, the market rates are such that the value of the property would still not have been enough to pay the loan off without significant capital infusion from the borrower. Additionally, the special servicer agreed that additional time was very unlikely to allow for increase in occupancy at rents that would allow for full pay off and was therefore not interested in extending the loan term

Solution

On behalf of the owner, 1st Service Solutions obtained a discounted pay off fin the amount of $8.250MM. This solution resulted in the most expedient outcome for the CMBS Trust and provided the greatest return to the bondholders.