Presenting a live 90 ‐ minute webinar with interactive Q&A Tenant ‐ In ‐ Common Workouts: Latest Developments Strategies for Owners, Sponsors, Brokers and Lenders Evaluating TIC Workout Options MONDAY, JUNE 17, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: T d ’ f l f Coni S . Rathbone, JD, CRE, S hareholder, Zupancic Rathbone Law Group , Lake Oswego, Ore. William M. Levinson, Co-Chair Financial S ervices Industry Practice Group, Fox Rothschild , Los Angeles Gary W. Marsh, Partner, McKenna Long & Aldridge , Atlanta Gary W. Marsh, Partner, McKenna Long & Aldridge , Atlanta The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Tenant Tenant ‐ In Tenant Tenant ‐ In In ‐ Common Workouts: In ‐ Common Workouts: Common Workouts: Common Workouts: Latest Developments Latest Developments p Coni S. Rathbone, J.D., CRE Coni zupgroup.com Legal Disclaimer No legal or other professional advice is expressed or implied by any of the presenters or in this written material. All parties are urged to seek competent legal advice bef ore making any decisions concerning their particular issue Special circumstances may cause different outcomes competent legal advice bef ore making any decisions concerning their particular issue. Special circumstances may cause different outcomes compared to those shared by presenter. Each case must be evaluated on its own unique facts and the applicable rules of law.
Current State of TIC Deals 1. CMBS Loans Maturing through 2017 ‐ Limited Refinancing Available in TIC Structure, Must do 721 Roll ‐ Up 2. Servicers Becoming More Inflexible: ‐ Few, if any, DPOs ‐ Some AB Structures ‐ PNA Ad PNAs Advance Waivers are Back W i B k 3. More TIC Sponsors Going Under 4. New Equity Available 6
TENANT-IN-COMMON WORKOUTS: TENANT-IN-COMMON WORKOUTS: LATEST DEVELOPMENTS LATEST DEVELOPMENTS Mark Levinson Mark Levinson, Partner, Co-chair of Financial Services Industry Practice Group Fox Rothschild Fox Rothschild, LLP, Attorneys 1800 Century Park East 1800 Century Park East Suite 300 Los Angeles, CA 90017 310.228.2133 MLevinson@foxrothschild com MLevinson@foxrothschild.com Fox Rothschild LLP | www.foxrothschild.com 7
Legal Disclaimer g The information contained in this PowerPoint is for information purposes only and not for the purpose of providing legal advice. Nothing contained in this outline is to be construed as the rendering of legal advice. Readers are responsible for obtaining any legal advice with respect to the matters discussed in this outline from their legal counsel in this outline from their legal counsel. We are not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this site is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will the authors of the information contained herein their respective related partnerships or of the information contained herein, their respective related partnerships or corporations, or the partners, agents, employees, trustees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this outline or for any consequential, special or similar damages, even if advised of the possibility of such damages. if d i d f h ibili f h d Fox Rothschild LLP | www.foxrothschild.com 8
Introduction: TIC Workouts G General l Most TIC loans are structured as non-recourse. Most TIC loans contain a non-recourse carve-out allowing the lender/servicer to accelerate the entire amount of the TICs allocable share of the loan. Most TIC loans provide the lender/servicer the right to replace the TIC investment program sponsor/property manager under the TIC Agreement. Fox Rothschild LLP | www.foxrothschild.com 9
Introduction: TIC Workouts G General l Rev. Proc. 2002-22 tax ruling plus rapid rise in real estate values in the 2000s created “perfect storm” of opportunity for real estate investors rolling out of created “perfect storm” of opportunity for real estate investors rolling out of income producing property to jump on pooled TIC investment structure to own bigger and better professionally managed income producing real estate assets and defer tax on the gain from their real estate sold. g 2008 real estate recession adversely impacted TIC owned real estate in the same fashion as any other investor owned real estate project. TIC owned real estate investors must make many strategic decisions that are handled differently than the single borrower structure. Fox Rothschild LLP | www.foxrothschild.com 10
Introduction: TIC Workouts From the Borrower’s Perspective A TIC workout involves control issues among multiple borrower/investors and securities, tax and bankruptcy law issues because • the property ownership and decision making is divided among many owners who cannot individually control the real estate asset (100% consent of TICS necessary to recast loan); • the property ownership and decision making is effected through a somewhat cumbersome “tenant in common agreement” to direct a manager as to how to handle significant property related issues; • the limited financial wherewithal of some TIC owners to fund capital calls to mitigate the impact of project revenue shortfalls (term limited under IRC to 31 days); days); • Lenders/Servicer limitations on their powers. Fox Rothschild LLP | www.foxrothschild.com 11
Introduction: TIC Workouts Lender/Servicer Perspective - unique complexities of TIC workouts seeks control over workout process and borrower (cooperation among borrowers). Seeks to avoid dealing with multiple borrowers. may need to deal with borrowers with limited liquidity. may need to deal with unsophisticated investor/borrowers may need to deal with unsophisticated investor/borrowers. Sponsor/manager viability as TICs may know nothing about the kind of asset they purchased ( i e of asset they purchased ( i.e. , apartments, office buildings, multiplexes, apartments office buildings multiplexes single family or condo rentals, raw land, farms, ranches, commercial and industrial properties). Fox Rothschild LLP | www.foxrothschild.com 12
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