Commercial Real Estate Attorneys Navigate More Complex Transactions
Kramer Levin’s Jay Neveloff has seen commercial real estate deals take on many forms over the course of his 36 years at the law firm. When the complexity of transactions began to intensify recently, he decided to get proactive.
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Steering CRE deals in the higher interest rate climate becomes more challenging for attorneys with more parties involved in the capital stack given the individual priorities of each investor, according to Sonia Kaur Bain, partner at Blank Rome. Buyers also have more opportunities now to assume existing loans with more favorable interest rates from owners who are motivated to sell, which adds more tension for lenders, Bain noted.
While deals with multiple competing interests face more obstacles in closing, Bain said when there are fewer players there’s extra motivation to close early, especially with certain higher-performing asset classes given the market uncertainty. The financing in those cases is ironed out later on.
“I’m either seeing deals close faster to avoid potential risks of changes in the market by parties, by lenders and terms,” Bain said. “Or I’m seeing deals closed without financing and go out for financing subsequently because it’s hard to pin down decent financing within the time period you need to lock down these deals.”
Bain said the experience from past dislocated CRE markets like the GFC invaluable for attorneys when strategizing how to respond to the headwinds clients are struggling against. She stressed that the big difference now compared to previous down cycles is that less debt is readily available, prompting more outside-the-box approaches to get transactions to the finish line.
“The leverages are shifting significantly all over the place on any given day,” Bain said. “Leverage on your typical private equity or investor may or may not have the same sort of leverage that they probably would have had in the past, and it’s forcing them to adhere to the money folks coming in and come up with these creative structures.”
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"Commercial Real Estate Attorneys Navigate More Complex Transactions," by Andrew Coen was published in the Commercial Observer on July 9, 2024.