Real Estate Recovery Team
Real Estate Recovery Services
Due to the economic effects associated with the COVID-19 epidemic, the real estate industry will be facing extraordinary challenges. McDonald Hopkins understands the real estate business and its unique challenges in today’s business climate, and has an interdisciplinary approach to solving your real estate issues. Using our integrated team of transactional, litigation and insolvency attorneys, we will assist you in solving the negative effects of the epidemic so you can come out of this crisis stronger than ever.
The COVID-19 epidemic and subsequent shutdowns of businesses have caused many tenants to default under their commercial leases. Our team has extensive experience representing both tenants and landlords in negotiating lease defaults. Rent suspensions, increasing landlord remedies and security interests, and waivers of late fees and default rates are just a few of the issues that must be understood and dealt with in the context of negotiating a workout of a commercial lease in default.
The shutdowns of businesses have caused differing interpretations of lease terms between landlords and tenants. Examples include interpretation of force majeure clauses, whether contractual performance has been rendered impossible by reason of government shutdown, and whether there is mutual default of the parties as neither can perform under the respective lease. Our team can assist in providing nuanced legal advice on any argument which may arise.
Tenant specific issues
In addition to negotiating defaults, there are a wide variety of issues which a tenant should be apprised of during the shutdown of business. Such issues include potential business interruption insurance policy claims, negotiation of tenant improvement allowances and rent commencement dates (if a buildout was ongoing prior to the epidemic), and the impact the shutdown or any lease amendment may have to the tenant’s existing credit facility (which is likely to be subject to a lender’s collateral access agreement).
Landlord specific issues
Like tenants, landlords are similarly dealing with landlord specific issues with the COVID-19 epidemic. Such issues include the payment of additional rent charges (such as real estate taxes, insurance premiums, and common area maintenance) which are normally passed through to the tenant, negotiating with landlord’s lender under existing credit facilities (in which the lender likely has collateral rights in tenant leases and rents), and negotiating with tenant’s lender who may be attempting to collect tenant’s personal property collateral which is located on the property.
As the COVID-19 epidemic continues, both borrowers and lenders will likely enter into forbearance agreements and loan modifications to reflect the changing economic realities. Our attorneys are well suited to meet the needs of both lenders and borrowers in negotiating loan workouts due to our extensive experience in a wide range of real estate lending transactions, including, without limitation, significant real estate loan workout transactions during the Great Recession.
Acquisitions and dispositions of distressed real estate
The COVID-19 epidemic may provide opportunities for clients to acquire distressed real estate at a significant discount value. There may also be needs for clients to sell their real estate assets. Our attorneys have extensive experience negotiating and handling the acquisition and disposition of distressed real estate both within the United States and internationally. Further, working in conjunction with our restructuring attorneys, our firm can represent both sellers and purchasers in the acquisition or disposition of real estate through state court receiverships, foreclosures and bankruptcy.
Stalled construction projects
Construction projects which began prior to the COVID-19 epidemic are likely delayed due to the unavailability of contractors and building materials. Many of the terms and conditions of such projects which were negotiated prior to the crisis are currently untenable. Our team has extensive experience negotiating construction contracts representing owners, architects, contractors, subcontractors and construction managers. If the construction process results in a controversy, our real estate attorneys work with our experienced and knowledgeable construction litigation attorneys to effectively represent the interests of our client.
By assisting clients in all aspects of contract drafting and negotiation, claim preparation, dispute resolution (through mediation, arbitration or litigation), our attorneys’ goals are for our real estate and construction clients to avoid unnecessary litigation. The firm’s lawyers provide timely guidance that protects our clients’ profits and human resources from the costly distractions of court battles. Whether the subject involves stalled construction projects, failed real estate acquisitions or dispositions, or lease disputes, this group is designed to concentrate the firm’s full measure of legal expertise and experience upon early problem identification and resolution.
Evictions / Foreclosures
We have acted as both landlord’s and tenant’s counsel in hundreds of commercial eviction and foreclosure matters. Although evictions and foreclosures are temporarily stalled or delayed in some states due to state specific moratoriums, once the court systems open up, there will likely be a wave of such actions to both prosecute and defend. Our experience includes pre- and post-suit negotiation, lease modification and, if necessary, suits for possession and damages.
Tax appeals of distressed real estate
The economic downturn of the COVID-19 epidemic may impact the real property values of your real estate assets. Our multi-state tax practice assists property owners in challenging the alleged fair market value of their real estate for real estate tax purposes. In a down market, this may result in real savings to an owner. Property owners should review the value that a county auditor/assessor assigns to their property to ensure that the property owner is not paying too much in real estate tax. Our attorneys have represented clients often resulting in significant tax savings.
Local, state and federal assistance programs
Our real estate attorneys, in collaboration with the McDonald Hopkins CARES Act Team and public law practice group, are keeping up on the rapidly developing opportunities for the real estate industry provided by local, state and federal relief programs. Our team has the most up-to-date knowledge of the programs currently being offered and can effectively help you prepare any necessary documents or filings to obtain such relief programs.
A SAMPLE OF REPRESENTATIVE CASES
- Represented an investor group with the acquisition of an auto parts manufacturer sold by state court receivership.
- Represented an owner of 950 units of garden-style apartment complexes in the workout and deed in lieu of foreclosure to main lenders with related discharge of personal guarantees.
- Represented an Akron, Ohio-based private golf club with a loan workout and golf club management representation to avert bankruptcy and shut down of club operations.
- Represented an international steel producer in the reorganization of operational assets and recapitalization of business pursuant to court-supervised sale and restructuring under the United States Bankruptcy Code.
- Represented hotel owner to bid in and purchased all hard assets of bankrupt onsite restaurant and obtained a full release from lease.
- Prevailed on motion for summary disposition (and subsequent appeal) on behalf of an anchor tenant in a shopping center, and against the landlord who claimed wrongful termination of the lease.
- Represented sellers with on-line real estate auction of commercial property.
- Represented a contractor in the successful enforcement of a $1 million construction lien on a hotel project in Miami Beach, Florida.
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