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Net Lease Capital Advisors? Carl Christensen
As problem loans are flushed through the system, a group of workout mavens met to hash out opportunities and challenges facing investors, borrowers, and lenders. We snapped Net Lease Capital Advisors? Carl Christensen, who says he expects plentyof foreclosure and sales activity. But if a lender forecloses and sells a borrower's property that no longer has any equity left in it, that borrower can face a hefty capital gains tax. However, Carl, a panelist at last week's Real Estate Finance Association/Turnaround Management Association meeting, has a solution: The borrower can deed the property back to the bank through a deed in lieu of foreclosure and do a 1031 exchange, purchasing a replacement property leased to an investment-grade credit tenant and spend less than they would paying the capital gains tax.
Goulston & Storrs Kitt Sawitsk
Goulston & Storrs' Kitt Sawitsky, another panelist, stressed the importance of understanding the financial situation andmotivations of one?s lender(s). In the early '90s, banks and life insurers held most loans, but debt coming due now often involves more complex structures, including CMBS loans. And problems created by the insolvency of a lender can make it very challenging for a borrower to modify a loan. No wonder it's taken quite a while for the Anglo Irish loan portfolio to come to market. In the end, any workout is a business deal that turns on a lender?s motivation and a borrower?s value-add, Kitt tells us.