Discounted Payoff
Property: Anchored retail center in Washington Loan Balance: $18.5 million
Problem: The loan was originated in 2002 and the lender procured a Phase I ESA at origination and determined that there was petroleum contaminated groundwater. To mitigate this risk, the lender required the borrower to execute an Environmental Guaranty.
Fast forward to 2012, the loan matured and the credit markets have drastically changed. The borrower was now unable to obtain traditional financing in the debt markets due to the recognized environmental contamination. Even though the property had positive cash flow, the underlying value of the collateral had diminished and the lender-obtained MAI appraisal produced a value which was over $3MM less than the outstanding debt.
Solution: Facing significant challenges related to this asset and the Environmental Guaranty, our team successfully negotiated a discounted pay off (“DPO”) in the amount of $10MM. This transaction included the lender waiving its rights to pursue the borrower for any deficiencies or guarantees in the loan documents.
This DPO amount allowed the borrower to find the new loan he needed and sufficient additional capital to remediate the contamination.