Howard Wenig, managing partner at Belkin Burden Wenig & Goldman, LLP said that a good deal of the firm’s practice involves representing lenders in the foreclosure process. He echoed Mr. Knakal’s sentiments about how lengthy it can be.
“The foreclosure process unfortunately in the past several years has moved to a stage of being exasperatingly long—several years,” Mr. Wenig said. “And depending upon the county it can take longer.”
Two main factors, he said, have increased the chances of a foreclosure resulting in a note sale—and they may actually be signs of an improving economy: healthier banks and improving commercial real estate prices.
“When the crisis first began I think lenders were in a position where they had an interest in not classifying those loans as being in default,” Mr. Wenig said. “That’s where the phrase ‘extend and pretend’ came from—where if a loan was even matured and the money was due and the borrower said ‘I can’t pay you off’ they extended it for two years and nursed the loan along for two reasons. First, the bank became healthier—perhaps selling the loan at a discount—and secondly the market would improve so that the value of the property would increase and they might be able to get paid off.”
But also in flux during the foreclosure process may be the face of the parties involved themselves. Mr. Schechtman and his team—which includes senior director Lipa Lieberman, director Marion Jones and associate director Abie Kassin—just executed a hard, non-refundable $65.3 million contract for a note secured by an eight building portfolio of buildings on and around Broadway in Upper Manhattan. It’s set to close around May 15, 2012. The borrowers included Neil Rubler from Vantage Properties and Area Property Partners’ Richard Mack.
Though he wouldn’t disclose the buyer, sources told The Mortgage Observer that it is Sentinel Real Estate, helmed by John Streicker, which made a deal with Onex Capital Corp., which holds the $23 million in mezzanine debt on the portfolio. Onex, sources said, will get a small return relative to the loan it wrote to walk away.
Mr. Schechtman pointed out that he was brought in 10 months ago by the special servicer, ING Torchlight. “The person who engaged me to market in the secondary market this note, was a special servicer,” he said. “The divisions of the lenders today who are handling the disposition or otherwise resolution of these loans are not the people who made the loans. And oftentimes it’s an amicable process.”
Mr. Schechtman was also just hired several weeks ago to represent General Electric—“It’s a $25 million to $30 million exclusive,” he said, secured by notes on 131 to 133 West 33rd Street. Other deals in the works include a Flushing Bay development site at 39-08 Janet Place in Queens and 85 Flatbush Avenue Extension and 333 Greene Avenue in Brooklyn.
With this volume of business, staffing can be an issue and both Mr. Schechtman and Mr. Knakal said that their firms had taken appropriate measures to staff up when they saw distress looming on the horizon. At Eastern, Mr. Schechtman, who said that he emulates mentor and firm president and CEO Peter Hauspurg on and off the field, talked about how staffing needs had changed because of distress. After leaving law firm DLA Piper as a sixth year associate and landing at Eastern “to take on a desk here—a cubicle—with no salary, no health benefits and no promise of any income other than a phone, the Internet and the Blue Book,” the prevalence of distress necessitated additional hands on deck.