Property: Office
Loan Balance: $11MM
Problem: The loan was originated in 2005 with a 7 year term and a maturity date of 3/2012. The current value of the property was significantly less than the loan amount and consequently, the borrower was not able to refinance the existing loan. A discounted pay off seemed like the only real solution as time alone would not allow for the property value to recover sufficiently to pay off the loan. The special servicer received an appraisal that was approximately the loan amount and yet all local brokers, comps and potential lending sources valued the property closer to $7MM. Since there was such a disconnect in the value, the special servicer opted to put the note in a sealed bid note auction and allowed the borrower to participate in the process. This way the special servicer could ensure that it received market value for the note.
Solution: The borrower purchased his note in the note auction for approximately $8MM and closed within 2 weeks of the auction.