Distressed Real Estate

Mayer Brown's Distressed Real Estate team brings together leading practitioners in the areas of real estate, securitization, finance, litigation, construction and bankruptcy to effectively represent lenders and servicers in all aspects of distressed real estate debt, including workouts, loan modifications, restructurings, bankruptcies, foreclosures, deed in lieu of foreclosures, Uniform Commercial Code (UCC) sales and real estate owned (REO) administration. 

Because of our extensive experience, Mayer Brown's Distressed Real Estate team is able to provide our clients with cost-effective strategies and representation to protect their rights and maximize the recovery on their assets. Our clients typically consult with us prior to any default, and we continue to assist them through the workout of the loans, the foreclosure on the property, and the asset management of the owned real property, as applicable. Additionally, we advise clients regarding any potential bankruptcy filing by a borrower.

Drawing from our experienced multidisciplinary lawyers, the Distressed Real Estate team has experience with assets ranging in size and complexity from multi-billion dollar, cross-border insolvency proceedings to mid-and smaller-market restructurings and recapitalizations. We regularly work in the restructuring, bankruptcy and insolvency, finance, litigation and real estate areas when advising our clients:

• Restructuring & Loan Workouts
• Bankruptcy & Insolvency
• Contested Real Estate Debt
• Distressed Real Estate M&A
• Bankruptcy Financings
• Securitized Real Estate Debt
• Intercreditor Agreement Issues
• Managing & Operating REO

Restructuring & Loan Workouts
In today’s economic environment, the lack of liquidity in the commercial real estate market means that lenders are faced with an increasing number of non-performing loans and financially troubled borrowers. Our Distressed Real Estate team works collaboratively and effectively to represent lenders and servicers by providing them with strategies to protect their rights and maximize the recovery of their assets. This coordination has been evident in our negotiation and documentation of complex restructurings of debt, including the acquisition of ownership interests in troubled real estate office and industrial buildings, hotels and other lodging properties, shopping centers and residential developments.

Bankruptcy & Insolvency
Our bankruptcy attorneys work closely with their real estate, finance, corporate, tax, litigation and other colleagues to bring a coordinated approach to distressed real estate bankruptcies, whether it involves office, industrial, retail, lodging or residential real estate. In particular, our bankruptcy attorneys regularly handle matters related to the negotiation and confirmation of plans of reorganization, valuation disputes relating to adequate protection or treatment of secured claims, relief from stay proceedings, and defense against preference and fraudulent conveyance claims.

When appropriate, we collaborate with lawyers in our well-respected Appellate and Supreme Court practice, the oldest and largest such practice in the United States, to protect the interests of our clients.

Contested Real Estate Debt
We have also consistently applied our cross-border, interdisciplinary and coordinated approach to contested real estate debt situations.

Where non-judicial foreclosure actions are not available or are not otherwise advisable under the circumstances, we have vigorously pursued judicial foreclosure actions and ancillary, as well as standalone, actions for the appointment of receivers for mortgaged properties. We have also commenced litigation, inside and outside of bankruptcy, to enforce our clients’ rights to payment, whether against borrowers or guarantors.

These proceedings are often intended to be summary and limited in nature, and we have the experience and skill to staff and prosecute them in a cost-effective manner.

Distressed Real Estate M&A
In the existing market, there are many opportunities to acquire distressed real estate. Again, our coordinated, interdisciplinary approach permits us to represent our clients effectively as they seek to acquire such real estate, whether through distressed debt purchases (with a view towards acquisition of the underlying real estate at a foreclosure sale or in a deed-in-lieu of foreclosure transaction), judicial and non-judicial sales of mezzanine interests or the underlying real estate, or Section 363 sales in bankruptcy, whether involving a single property or a portfolio of properties.

Bankruptcy Financings
We regularly represent lenders in connection with loans made to debtors to finance their ongoing operations during the pendency of their bankruptcy cases. For lenders, these loans are often “defensive,” made to protect or improve a pre-petition credit position. They may also be “offensive,” made where the primary motivation is the potential profitability of the transaction and the opportunity either to provide exit financing or to acquire the collateral itself.

Securitized Real Estate Debt
Securitization documents, as well as tax and rating agency considerations, restrict the options available to the parties to restructure underlying loans. Additionally, the existence of multiple layers of debt, including pari passu and junior participations and notes, and multiple layers of mezzanine debt add complexity to a securitization vehicle’s response to non-performing loans and related negotiations.

Mayer Brown’s Distressed Real Estate team represents commercial mortgage-backed securities (CMBS) master servicers and special servicers on distressed debt situations, including in connection with workouts and foreclosures of securitized mortgage loans.

Intercreditor Agreement Issues
Many CMBS and non-CMBS real estate deals involve multiple layers of debt finance, in which the relationship between the senior lender and junior lender are governed by an intercreditor agreement. Mayer Brown lawyers are very experienced in negotiating intercreditor agreements for both senior lenders and mezzanine lenders in addition to lenders in an A/B note structure. In these situations we advise clients on intercreditor rights and issues in distressed debt situations and structuring workouts and foreclosures based on the provisions of the intercreditor arrangements. Many of our partners are involved with industry organizations and committees, and regularly participate in the industry by teaching, publishing and speaking on a variety of issues.

Managing & Operating REO
Mayer Brown is experienced in representing owners and lenders who have acquired (or are in the process of acquiring) all manner of REO property. The Distressed Real Estate team is well-versed in the legal aspects of owning and managing real estate, including analysis of liability for defects in residential construction and analysis and re-negotiation of obligations under development and annexation agreements. Our team has developed fair and balanced lease forms, resolved disputes with tenants and homeowners, and worked with condominium and homeowners’ associations. We have negotiated and documented listing, consulting and property management arrangements while continuing to focus on the owner’s financial objectives.