Retail

Suburban St. Louis | Southeastern MA

When a $30MM Loan Can’t Be Refinanced. Listen. Carefully.

challenge

The retail landscape had shifted dramatically, leaving a once thriving suburban St. Louis Shopping Center to face dire circumstances.

• Attracting prospective tenants to fill vacancies had become near impossible. 

• Several junior anchor box stores were already vacant or were in the process of vacating.

• The $30MM loan was about to mature and couldn’t be refinanced due to its current underwriting and valuation.

Solution

The Henley Group was hired to help determine how to save the property. Our approach, always grounded in the power of listening, revealed what we needed to proceed.

• In the early stages of the process, through multiple conversations with the Lender, we understood a fuller story and where there would be room for negotiation. 

• While it was never explicitly stated, we discerned that the Lender did not want to actively foreclose on the Shopping Center. We leveraged that insight going forward.

• Making a calculated risk, informed by decades of successful negotiating, we took a more aggressive stance on the loan modification terms.

Outcome

The rate was lowered several HUNDRED basis points so the Borrower could service the debt based on lower projected cashflow over the next several years. The Henley Group was instrumental in getting the Lender to write a four year extension with a one year option. Plus, allow for funding of additional proceeds to pay anticipated TI and LC costs.

New Asset Manager Assigned in the 11th Hour of Negotiations.

challenge

Even after the loss of its major tenant, which left the property 60% vacant, the Owner was fiercely committed to retaining and re-developing their suburban Shopping Center. For six frustrating months, the Borrower attempted to communicate the difficulties surrounding the tenancy and weak market conditions to the Servicer.

• The Borrower was unable to sufficiently capture the Lender’s attention and initiate any meaningful dialogue.

• The Lender did not understand the area’s dire market conditions, the neighboring big box competitor vacancy issues, the building’s equity requirements or the Operational & Easement Agreement associated with the site.

• The property lost significant value, placing the loan’s repayment in jeopardy.

Solution

On behalf of the Borrower, The Henley Group took charge and immediately developed and managed an entirely new course of negotiations with the Servicer, uncovering critical information to effectively execute a deal.

• After the A/B note amounts had been mutually agreed upon, late in negotiations, we discovered that the primary asset manager was retiring and would soon be turning over his files. It was important to get an early read on the new manager.

• From the trusted relationship nurtured with the original asset manager, The Henley Group was able to learn what objections the new asset manager had to the negotiated deal terms currently on the table, which provided insight for an effective initial call with the new asset manager.

• As opposed to remaining entrenched in our previous position, we convinced the Borrower to increase the A note by an amount that supported the Lender’s appraisal yet was within the Borrower’s target zone to satisfy the new asset manager’s expectations. Without this concession, the deal would likely have cratered as the amount of the original A note had not conformed to the Lender’s loan committee’s NPV requirement.

outcome

The Henley Group was able to focus the Lender, amalgamate the due diligence, model and re-model various requested financial scenarios, and nurture a productive and trusting rapport with the two asset managers. The A note discount deal was approved by the Lender’s loan committee and the Borrower received approximately a 60% reduction in principal and interest payments for 5 years.