Avoided Cash Sweep

In our role of compliance and surveillance for an owner with a large CMBS portfolio, we were able to save the owner from being put into a cash sweep with no easy way to get out.  There was a cash sweep event in his loan document where a specific, large tenant had to provide notice of its intent to renew by 12 months prior to the expiration of its lease, or 8/1/2018.  The borrower was in preliminary discussions with the tenant to renew but the lease didn’t require the tenant to give notice of its intent to renew until 6 months prior to expiration, so the tenant had not sent its official notice yet.  The borrower was in discussions with the tenant about a 3-year lease renewal.  It would have been easy for the borrower to miss this notice period and finalized the 3-year renewal, thinking all was fine.

Fortunately for this borrower, our surveillance team alerted the borrower in time to allow the borrower to avoid the cash sweep!

Had the borrower not provided written confirmation of tenant’s intent to renew by 8/1/2018, cash sweep would have been triggered and the only cure to get out of cash management for this issue was a 5-year lease extension (not 3-year extension)!