So-called bad-boy guarantees have recently created headaches for borrowers when CMBS loans go bad, industry experts told Mortgage Observer. A number of recent cases across the nation have interpreted the guarantees, which prohibit certain borrower activity, like “indebtedness,” and “insolvency,” to mean that the principals of a borrowing entity are personally liable for losses in the event of default—a shocking development for CMBS borrowers and lenders alike.
It began with a 2011 case, Wells Fargo vs. Cherryland Mall, which rose to the highest court in Michigan. A provision that the borrower would “not become insolvent” was found to constitute a personal guarantee by the principal of the development company, which had defaulted on a CMBS loan, said Sam Lee of Duval & Stachenfeld. “It created a ripple effect,” in the industry, he said, because that “innocuous phrase,” one type of bad-boy clause, was boilerplate in many CMBS loan documents at the time. (The ruling by the Michigan court was actually later overturned by the state legislature, in an unprecedented move).
Post-Tropical Storm Sandy
Go to any commercial real estate industry event, and the disproportionate numbers of men versus women in attendance are hard to overlook. That commercial real estate—and the finance end of the business, in particular—can be a lucrative career path begs questions about why women remain so outnumbered.
One New York Plaza is officially open again – as of this past Saturday – following a shutdown due to tropical storm Sandy. Building owner, Brookfield Office Properties, said that the company has property, casualty and flood insurance and anticipates full coverage of losses. “The storm will have no material financial impact on the company,” the firm said as part of a release.
Hurricane Sandy caused a surge that increased ocean water levels and flooded numerous coastal areas of New York City, including the southern tip of Manhattan where One New York Plaza is located.
“Brookfield’s property operations and maintenance personnel removed all water, restored services and prepared the building for the safe return of tenants,” a Brookfield spokesperson said.
With some of the largest commercial real estate deals happening right here in our own back yard, it’s no surprise that New York is home to a bevy of law firms with real estate departments vying for a piece of that action.
Leases, sales, land use and loans are all the beginning for many of these firms, whose New York offices can be the nerve center for a lot of their worldwide real estate practices.
The Commercial Observer touched base with some of them to get an idea of how real estate fits in to the overall picture in terms of metrics. Though some weren’t included because they didn’t respond in time, the numbers for those that did show some firms surviving on New York real estate alone while others—large and small—devote a big percentage of their firm-wide workforce to the area.