Fordham University South Shore Portfolio Loan Property and Pay Reposition Memo Please write a brief write up re an initial exit strategy as well as further

Fordham University South Shore Portfolio Loan Property and Pay Reposition Memo Please write a brief write up re an initial exit strategy as well as further analysis to support or change the recommendation. What your thoughts are? Which scenario should they choose?(there are 4 scenarios at the bottom) And what’s the reason for them to choose that scenario? Just a few sentences is needed, but make sure all questions are answered. MEMORANDUM
TO:
Jeffrey Baevsky, Arthur Hatzopoulos, Mark Jarrell and Michael Ting
FROM:
Alix Pierre
CC:
Steve Germano and David Tokos
DATE:
June 4, 2018
RE:
South Shore Portfolio – Loan #3705
Purpose
PLGAM thoroughly vetted all viable exit scenarios to determine the most cost-effective strategy to maximize
Greystone’s recovery on the Loan. PLGAM’s analysis consisted of a comprehensive evaluation of the following
factors: 1. the declining market value of the Property; 2. the Property’s poor operating performance; 3. lengthy
time and high carrying costs associated with repossession of the collateral property through foreclosure; and
4. the Borrower’s inability to stabilize the Property and lack of capital leading to additional value deterioration.
Loan Summary
OSPB:
Interest Rate:
Closing Date:
Extended Maturity Date:
$7,245,000
L+5.25%
11/5/2015
11/1/2018
Background
The Loan is secured by the South Shore Portfolio (the “Property”) which consists of 181 apartment units spread across
four 3.5-story walk-up, multi-family buildings located on the south side of Chicago. The Loan was originated to
facilitate the acquisition of the Property and execute a business plan designed to achieve 85% occupancy and increase
the net operating income (NOI) to approximately $572,136 (within 18 to 24 months) prior to applying for Freddie
Mac SBL permanent financing. During the term of the Loan, Property operations failed to meet the projections
required to qualify for permanent financing. Consequently, the Borrower attempted to sell the Property to pay off the
Loan prior to the maturity date of December 1, 2017. However, a substantial re-trade in price by the potential Buyer
during due diligence, would have prevented the Borrower from recovering most of their equity investment. The sale
was subsequently terminated by the Borrower.
Following the cancellation of the sale, PLGAM agreed to extend the Loan until November 1, 2018 to allow time for
the Borrower to complete unit interior improvements, stabilize the Property’s occupancy, improve Property
performance and enhance the curb appeal and marketability. As a condition of the maturity extension, the Borrower
paid down payables and funded $70,000 into the Repair Reserve held by Greystone. An additional $200,000 is to be
funded into the Repair Reserve no later than June 9, 2018. The key principals have made several cash calls to fund
deficits and repairs over the term of the Loan. They have indicated that they will most likely not be able to raise more
capital if required.
Survey of Scenarios
The Property’s history of poor operating performance poses a risk of loss to Greystone. There are several options
available to a lender to mitigate potential loss for under-performing loans. PLGAM conducted an in-depth analysis
of four scenarios to evaluate Greystone’s exposure to loss and determine the best course of action for the South Shore
Portfolio. A comparison of the following scenarios has enabled PLGAM to identify the strategy that will yield the
most optimal result:
(1) Extend the Maturity Date – Extend the current Maturity Date of November 1, 2018 to allow time for
the Borrowers to execute their current business plan and improve the Property performance. Refinance or
sell the stabilized Property to pay off the Loan.
(2) Restructure / Modify the Loan – Design a loan restructure that will improve Greystone’s position while
allowing the Borrower the relief and time needed to reposition the Property and pay off the Loan.
(3) Foreclosure and Sell – Complete a 24-month foreclosure process and sell the Property at the current
appraisal value.
(4) Note Sale – market and sell note.

Purchase answer to see full
attachment