5.9.13: A River Runs Through It

One the amazing things about commercial mortgage lending is how something totally out of left field can crop up to delay or derail a financing.  Sure, there is the old saying “time kills deals,” in which the passage of time causes a deal to die, perhaps due to increases in rates, a buyer comes along and puts the asset under contract, the market collapses (can you say CMBS and 2008), or the borrower simply changes his mind, possibly due to deal fatigue.

But I am not talking about these instances. I am talking about a transaction flying along at a 35- to 40-day closing pace and then 5 days before closing: wham! The left hook puts you down for an 8-count or worse, a KO.

We recently had two of the latter situations. We were trucking down the freeway, but at the 11th hour it turned out the franchise agreement had never been properly transferred to the sponsor many years ago (frankly, the franchisor knew nothing about it). With not much time left on the agreement, the sponsor needed a brand-new ten-year license.  Ouch!  Time-out for 30 days, then we completed the transaction.  Only one 8-count on that one.

The next situation is even more bizarre.  The drive was right down the fairway and bouncing to a stop about 275 yards out when the ball hit a rock and bounced into the water.  Only on this deal the water (actually, it was a stream) had long ago been filled in by the State of New Jersey.  And then our sponsor built a hotel on top in 2001.  But it seems like the State of New Jersey still owns the “stream” that runs under the hotel (about 9% of the total land area).  Since our sponsor does not own all of the land, the sponsor cannot get title insurance.  No title insurance? No deal.  So we have an 8-count while the sponsor goes back to the State of New Jersey to acquire title to the land . . . and we keep our fingers crossed that we can avoid a KO.

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This entry was posted in Commercial Lending, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress and tagged , , , , . Bookmark the permalink.

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