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May 23, 2016

A multi‐billion real estate acquisitions and development firm seized an opportunity to acquire a significant portfolio of trophy office properties located in Manhattan.

Client Mandate
A multi‐billion real estate acquisitions and development firm (the “Company”) seized an opportunity to acquire a significant portfolio of trophy office properties located in Manhattan. In order to acquire the portfolio in an accelerated timeframe, the Company incurred new debt, including senior and mezzanine debt, as well as a credit facility personally guaranteed by the Company’s principal.

The acquisition debt was short‐term (approximately a year), with the expectation that longer‐term, permanent financing could be arranged before the acquisition financing matured. Within six months, the real estate capital markets had compressed, dramatically changing the availability of financing. At the same time, valuations began to decrease. As a result, the Company hired A&M to assist in the restructuring of approximately $8.5 billion of debt.

A&M’s Approach
A&M immediately focused on evaluating the Company’s portfolio to:

  • Update and create Argus models (valuations) based on current market information
  • Develop a comprehensive Company cash flow, including capital needs for developments
  • Understand the Company’s recourse and non‐recourse debt obligations, including prepayment penalties

After developing the necessary fact base, A&M was able to prepare a comprehensive strategy, allowing the Company to emerge from the situation on solid footing.

Results
After performing requisite due diligence, A&M proposed the following three‐part strategy to resolve the Company’s debt issues

  • Cooperate with the senior lender in the sale of a cross‐collateralized portfolio Divest of selected assets to repay certain recourse obligations with other key lenders
  • Retain strategic properties to maintain adequate cash flow and future portfolio value

In connection with the Company’s outside counsel, A&M negotiated with multiple lender groups to effectuate the proposed strategy, ultimately, navigating through four separate debt restructurings. Based on our recommendations, the Company was able to successfully restructure its debt, allowing it to focus on future business pursuits.