Borrower Balloon Payment Blows Up

Industrial Park/Mixed-Use

Commercial real estate financing is complex, especially CMBS loans. Borrowers often face surprising and unexpected challenges, mounting frustration, and unyielding stress. Today’s economic environment has only exacerbated problems as lenders have become increasingly inflexible. Such was the case for our client, a seasoned property owner of numerous office buildings in a Southeast industrial park. Here’s what happened:

The Backstory

Good news. Our client secured new financing for the industrial park and needed a payoff statement from their lender to close the deal. Bad news. The closing date did not coincide with the balloon maturity date, triggering a default late charge of nearly half a million dollars.

The loan servicer imposed a default late charge on the property owner's CMBS loan balloon payment. Surprisingly, the $500K default fee appeared on the payoff statement just TWO days before the loan maturity date.

Racing Against the Clock

With the stakes extremely high, The Henley Group (THG) was called upon to negotiate a resolution that would avoid litigation for what the Borrower considered "last-minute and unfair charges” and the very real possibility of losing the new financing that was in place.

 

The clock was ticking with only days to spare. Leveraging our strong relationships with both the master and special servicers, the team immediately got to work navigating the precarious situation.



Negotiating for Success

Through intense discussions and skillful negotiations, The Henley Group successfully reduced the default late charge from $500K to $100K. This not only saved the Borrower a substantial amount of money but also allowed them to close on time, within 14 days, steering clear of lengthy and expensive legal battles.


The key lesson for borrowers of securitized loans, particularly CMBS loans, is to thoroughly understand the intricacies of loan agreements. Such contracts are highly specific when it comes to defaults and triggering events, especially around the loan's maturity date. While the loan servicer had every right to impose and collect the default late charge, our experience and expert advice delivered a better outcome for all parties. THG’s swift action resolved the Borrower’s fears and frustrations and underscored the significant impact that building strong relationships and keen negotiating skills play in overcoming seemingly insurmountable challenges.

We know the road ahead can be rocky, but it's never too late to start a conversation.

About The Henley Group
We are expert CMBS Borrower Advocates with extensive experience partnering with clients to catalyze loan resolutions. Dedicated to service excellence and outstanding outcomes, we have worked out over $12 billion in CMBS deals to date. We are proud of the deep relationships The Henley Group has forged with Special Servicers for nearly 15 years. Our unique skill set, patient negotiating style, and understanding of Special Servicing allow us to get results that may not be available to you.
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David Goldfisher
(617) 320-0284

Tammy Goldfisher

(617) 512-1135 

tammy@thehenleygroup.com
David Arthur
(617) 719-1087

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