The Dirt Lawyer's Blog Archive

Happy May, everyone! Swine flu scares notwithstanding, I'm looking forward to what is left of the spring. Work is still busy, but I did find a few interesting things in the blogosphere and the internet that I'd like to share with you. Still confused by defeasance? Don't worry, most people are. My first one was . If you really want to learn more, here's a primer you might find interesting (H/T Deal Junkie .) Do you think we're gonna see some M&A activity in the REIT market? (Short answer: yes.) "Banks are shortening the terms on lines of credit that have long been used by companies to avoid cash crunches -- a sign that while lending is reviving, businesses are facing new hurdles to obtaining credit." More news on a " rising tide " of CMBS defaults according to Fitch this morning, including the number of loans going to special servicers. I wonder aloud whether some borrowers are just trying to get to special servicers for workouts or to...

The Ground Floor reports: The sale of the General Motors Building (in New York) continues with at least two bidders still in hunt; expected sale price will exceed $3 billion. Interestingly, the current first mortgage encumbering the building (approximately $2 billion) is not pre-payable, thereby causing the buyer to have to invest an unusually high percentage of cash (or sell some type of preferred equity position in the property). I don't understand the last part of the analysis. You see non-pre-payable commercial loans all the time. The usual M.O. is to defease the property by substituting U.S. Treasuries for the mortgage payments. (If you want to know more about the fascinating topic of defeasance, I recommend going to the website of Commercial Defeasance, LLC . I did my first deal with them when they were just starting out and enjoyed working with them.) Anyone out there working with non-defeasible products out there? Or could it be that the buyers want to try and assume t...