Understanding a Loan Workout

A foundational task of any successful real estate Loan Workout is to fully understand the current market value and net operating income of the asset. Prior to commencing a Loan Workout on any distressed property or property in default, the lender faces a number of options. Among its many options, the lender can

  • –  Foreclose
  • –  Restructure the loan
  • –  Accept a discounted payoff, or
  • –  Agree to a temporary suspension of debt service to allow the borrower time to cure or otherwise improve its situation.

Conducting pre-workout due diligence, understanding market fundamentals, ordering appraisals, reviewing title and carefully examining the current financial health of the property are all critical to understanding the asset and its value.

The Loan Workout Process

Above all, the guiding principle of a Loan Workout is to preserve the asset. But understanding the asset and its value is critical to the Loan Workout process. Armed with an objective study of the property's actual financial health, the parties to the Loan Workout can then negotiate the best course of action to most effectively realize the income producing potential of the asset. more details...In a Loan Workout, Real Diligence thoroughly reviews and summarizes the property's financial statements, budgets, leases, income and expenses, including evaluation of reimbursable income and expense methodology, which is necessary to arrive at the property's true value – and which is at the core of developing a profitable Loan Workout Plan.

Our Loan Workout Services

Real Diligence coordinates all of the due diligence, providing a myriad of services.

Real Diligence can:

  1. Provide an accurate appraisal of the property
  2. Review and report on market fundamentals
  3. Update and prepare title
  4. Analyze, review and report on the financial health of the property, including a comprehensive review of every income and expense line item, leases, management agreements and service contracts
  5. Prepare Operating Budgets
  6. Update Underwriting Models
  7. Report on current asset performance
  8. Prepare, negotiate and secure Estoppel Certificates from the borrower and key tenants
  9. Review Subordination Agreements and analyze key tenants' rights and obligations
  10. Work hand-in-hand with opposing counsel