Real Estate Finance Report (Spring Edition)

Welcome to the inaugural issue of Seyfarth Shaw’s Real Estate Finance Report, the quarterly newsletter of the Structured and Real Estate Finance Group (SREF) and the Distressed Asset Resolution Team (DART) of Seyfarth Shaw LLP. We have long believed that our time (which, of course, is our principal resource) is best devoted to supporting our individual clients’ programs and goals. In looking for an efficient and informative way to reach our clients and friends at one time with topics of general interest and matters of timely importance, we readily determined that a newsletter format was the answer. Therefore, thanks in large part to our editor, Mark Mengelberg, whose considered observations and persistent efforts were key to the launch of the newsletter, and to Frank Johnson, our group marketing manager, we went to press. A few words about the commercial real estate lending marketplace:

Few sectors of the lending community are untouched by current conditions. We’re always impressed by the manner in which the community works to adjust and learn from market experience. As with much learning under difficult circumstances, some of it is just plain painful as many individuals and companies suffer adverse news and significant challenges. We do not know how long the downturn will last or how many of the recent vintage loans will default or when investors may emerge or return. We do sense an increased aura of readiness in the community to deal with the problems and move forward. It is with this mix of realism and optimism that we offer our first newsletter. This first edition offers assistance to real estate lenders providing funding for California properties by seeking to clarify the well known, but still not well understood, “one-action rule.” We also seek to clarify one of the hottest areas in real estate finance, mezzanine financing, by discussing the perfection of security interests in mezz collateral. From a different perspective, more than a year ago, SREF, concerned by the overheated real estate market, created a workout/enforcement group. This group joined with members of the bankruptcy, litigation, tax and environmental groups to form DART. The DART section of the newsletter presents an article addressing the effectiveness of a borrower’s waiver of the Bankruptcy Code’s automatic stay provisions. Finally, believing that our newsletter should also be a forum for the expression of different viewpoints, from time to time we will have guest contributors or conduct market interviews. In this issue, we spoke with Terrence Daly from Kearny Capital Partners, who speaks candidly on which deals are being financed in the current market and on what terms. Finally, in our Dealmaker Summaries we have included some very useful insights on recent transactions that have been handled by SREF and DART attorneys. We hope you enjoy this newsletter, and we look forward to your comments and suggestions (which, if highly complimentary, we may print).