Restructuring and Workouts

The terms "real estate" and "restructuring" have been practically synonymous since the financial crisis of 2008, and the sector is likely to go through more pain before things improve. On the plus side, the bust has created opportunities. Whether you want out or in, top flight legal counsel is a must. Manatt's real estate workouts and restructurings team has a long history representing lenders, investors, owners, and developers in all aspects of troubled or non-performing real estate assets, as well as in the reorganization of partnership and landlord-tenant relationships. Working with the firm's corporate, tax, bankruptcy, and capital markets practices, our real estate workout and restructuring lawyers have negotiated, mediated or litigated effective and often innovative solutions to a wide array of debtor-creditor challenges.

General Restructurings and Asset Sales
We have restructured real estate debt and equity investments, development and operating partnerships, acquisition and divestment transactions, and leasing arrangements. Our experience ranges from relatively straightforward modifications and extensions of loans, leases, and partnership agreements to more complicated judicial and non-judicial foreclosures (or deeds in lieu of) security interests to immensely challenging multi-party, multiple-property, cross-border matters involving complex contractual claims and huge amounts of money. Our large law firm resources allow us to field the interdisciplinary teams necessary to effectively and efficiently address such matters.

We have represented buyers, sellers, and financiers in over 100 acquisitions/dispositions of portfolios of distressed real estate loans and REO property. These transactions, which cut across all real estate product types, included one of the first successful sales of distressed assets by a commercial bank in the aftermath of the financial meltdown. Our assistance in such transactions includes developing asset disposition and acquisition strategies, contract drafting and negotiations, due diligence, pricing, conveyance and post-acquisition asset management.

Bankruptcy and Litigation
Our bankruptcy lawyers and litigators have been involved in numerous real estate-related workouts, Chapter 11 filings and related litigation on behalf of public and non-public companies; banks, institutional lenders, mortgage companies and private lenders; private investment companies, including REITs and real estate investment funds; formal and ad hoc creditor and bondholder committees; and trustees. With that depth of experience behind us, we can help you successfully structure, document and implement debtor-in-possession (DIP) financings, as well as assist in the bankruptcy purchase and sale of entire businesses or assets of operating divisions, including interests in developed, undeveloped, under-performing and non-performing property.

Our workouts and restructurings team and our litigators frequently join forces to formulate, implement, and evaluate the effectiveness of strategies for coping with the many business and legal disputes the current economic environment has caused, including foreclosure and guaranty actions arising from non-performing loans, complex receivership matters involving failed development projects, mechanic's liens and stop notice claims, partnership litigation, title insurance claims and litigation, and legal actions arising out of loan participations and debt syndications. Our litigators have years of experience filing and defending such cases on behalf of owners and developers, special asset departments of major financial institutions, pension funds, and other real estate investors.

Tax Considerations
A real estate workout may involve many different scenarios, including cancellation of debt, modification of the terms of a debt instrument, contribution of fresh cash to the venture, and satisfaction of some or all of the debt in exchange for an equity interest in the debtor. If a workout cannot be achieved, the specter of foreclosure or bankruptcy arises. Each scenario is likely to have its own tax consequences, which can be either positive (a significant opportunity to reduce taxes) or negative (an increase in federal or state income tax or a steep local transfer tax). Our tax lawyers have worked on many distressed real estate matters and know how to help you ensure that whatever the solution, it is structured in a tax-favorable way.

Environmental Concerns
Purchasers and sellers of financially distressed commercial real estate must evaluate the subject property for environmental liability risk, which can have a negative impact on its current value and revenue-generating potential, as well as create direct liability for both sides. Failure to identify environmental risks during the due diligence period increases the likelihood of not closing the deal.

Our environmental lawyers help you conduct a thorough environmental liability risk assessment with respect to contamination, compliance, and development. Based on their findings, our team then provides you with risk mitigation and allocation options, such as excluding facilities with contamination or non-compliance issues (or requiring that the issues be addressed prior to closing); drafting and negotiating representations, warranties and indemnity provisions; using environmental insurance to manage risks not typically covered under traditional property and casualty policies; and employing other transactional mechanisms, such as closing conditions, seller-retained liabilities (giving due consideration to potential claims of successor liability), price reductions or escrows, and "no dig" provisions.