Transaction Overview
GSP arranged the modification of a loan that was in default of its covenants. The $8,000,000 original loan was full recourse to the borrower, and was current with significant term remaining. The bank subsequently found the loan to be out of compliance with its 65% loan to value covenant and therefore accelerated maturity. The subject property, a creative office building in West Los Angeles, is located on a major artery in a business district. Although the property’s value had clearly declined since the loan was funded, monetary default was not looming. The acceleration placed the borrower in some distress due to pending lease roll over and associated difficulties with refinancing. GSP used its relationships with bank personnel to reestablish communication, then presented a detailed critique of the bank’s appraisal and recommended a loan modification structure that was of mutual benefit. The bank agreed to a new appraisal, which corrected errors in the earlier report, and ultimately modified the loan. The bank required a $500,000 pay down, and shortened the loan maturity. The modification avoided foreclosure or legal action, and provided enough time and cash flow to work through lease roll and refinancing.
