BrightSpire - forcing sales, foreclosures, short sales
Been seeing a lot of lender driven sales initiated by BrightSpire in the Sun Belt. In some instances, the buyer is not even in default, the lender simply refused to give extensions. Any insights on this? Any other lenders doing similar things?
Not sure what you mean. Haven't seen BrightSpire's loan docs, but usually extensions are a given if certain loan stipulations are met e.g. DY, DSCR, and LTV. So if the stips are met, then they can extend their loan. Sounds like their business plan did not go to plan and didn't hit their extension hurdles.
If the properties are in good shape, they should be able to refi out with an other lender.
Yeah, if there was already an extension option in the original loan agreement then it's likely some extension threshold was not met. I've been seeing similar activity from local/regional banks that were pencils down during rate hikes. RE is taking up too much of the balance sheet and they need some redemptions before pricing adjusts completely and their "relationship lending" terms don't look so strategic anymore.
Yeah, this is correct. It is more like 80% of banks though.
If the deal is selling above loan value then it makes sense. Wouldn’t it be better for the lender to extend if the borrower is current, instead of selling below loan value and taking a loss?
Totally depends. If the market outlook is poor, selling now vs future may be the best option to recover as much principal as possible. Hopefully, a majority of lenders and borrowers were responsible enough to not lever up too much and have a 30%-40% cushion in asset value before the sale price dips below the loan amount. It does take a lot more than just denying an extension option for the lender to take over the property and sell. That would imply the seller was either not able to secure any kind of refinancing proceeds or sell within target pricing which likely indicates it was a poor investment or something went wrong along the way. There are also very few instances where there can be a lender sale without the borrower being in default/amicably turning the property over to the lender. Some people got in over their heads it seems.
Looking at some deal where value is 20% below loan value rn…that’s a big hit the lender is taking. If they kick the can down the road maybe the blow will be softer. This is multi, if its office I’d say there is not light at the end of the tunnel.
In my opinion resi has a lot further to drop than office over the next few years. No one has been building office and the pricing has adjusted substantially whereas resi in certain markets is oversupplied and rents are starting to feel the pressure.
assuming you mean multifamily?
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