What Asset Managers Nationwide (with Florida Commercial Real Estate in their Portfolios) Will Need to Confront in 2021 – Filing Foreclosures

As a commercial asset or loan portfolio manager, private lender, or loan investor with oversight over Florida commercial real estate, one of the last things you want to see, hear, or watch happen is  2020 bleed into 2021 and, with it, the continuing non-performance of your Florida commercial real estate assets.  The 2020 forbearances were a gesture designed to deal with the economic reality of the pandemic and seek a way to navigate the financials through the “short-term.”  The danger was, and the apparent reality now is,  the inevitable non-performance as a “way of life.”  When things have reached this point, you soon come to the realization that a decision must be made.  You either sell the paper and take a loss, walk away and move on, or make the tough decision to recoup or recover what you can as soon as you can.  

“Pandemic” 2020 has been a difficult year for commercial real estate, and all indications are that 2021 will see us continue this “distressing” theme.  Federal Reserve data show U.S. commercial property debt climbed to an all-time high of $3.06 trillion in the 3rd quarter from a 10-year low of $2.2 trillion in 2012.  Florida commercial real estate, in particular, will see the effects of the forbearances coming to an end.  Yet, while the coronavirus has led many states to ramp up lockdowns, Floridians dealing with real estate matters enjoy the good fortune  of the non-lockdown mentality which offers hope that if you have to go through the foreclosure process and get to the auction arena, you will have investors there who are ready, willing, and able to scoop up valuable and viable commercial properties that serve to pay off judgments.  

With forbearances ending, asset managers need to finally proceed with legal action perhaps for no other reason than eventually, you run out of runway to wait on the borrower.  Under that circumstance, you undoubtedly want everything to move forward as quickly and seamlessly as possible – especially knowing that the legal process is time-consuming.  Besides, the practical reality is that the only way to start a legitimate track to financial recovery involving a non-performing commercial real estate facility is filing a foreclosure lawsuit.  That will ultimately serve to get your loan reinstated and performing, paid off, or the stage where a court issues a final judgment and an auction sale date is set.  In other words, payment and recovery of the loan monies is then in view.   

The commercial mortgage foreclosure roadmap in Florida is well established; pursuing the judicial foreclosure of a mortgage that collateralizes a defaulted loan is straight-forward.  Yet, the practicalities of the pursuit can be mind-bending.  First, the escapades experienced during the Great Recession in the residential sector serves as a barometer for the creative and unpredictable nature of defense counsel to raise defenses which are inconceivable, but yet meet their objective – delay.  Second, the pandemic has served to bring the process to a crawl in many jurisdictions.  The “legalities” aside, simply getting hearings, timely notices, and other logistical aspects of the legal process can take and seem like an eternity.  And Zoom calls – while convenient and efficient in nature – has taken away the opportunity for Judges to hear “first-hand” accounts of defenses that at times sound ludicrous on paper, but frankly, even more so, when heard before a judge “in person”.  All to say that, in 2021 – expect more of the same.  That being the case, those who used forbearances throughout 2020 and have been in a holding pattern due to the pandemic – will now have to confront and act.  The longer they wait, hoping for a miracle – a “Hail Mary” pass, or doing the same thing over and over expecting a different result – the more necessary it becomes to pursue a legal route in order to stop the financial bleeding.  Sad but true, borrowers not paying on loans after many months, but who now can pay, will somehow convince themselves and others that your loan “involved fraud”, or a scheme to “fool them” into taking the loan, or they will raise all manner of nonsensical issues and claims that have no merit but serve to delay the foreclosure process.  And the legal system, designed to afford every party their “day in court”,  will provide hearings and forums to entertain these defenses and claims, … for a while.  All of which, naturally, serves to extend the case and the day of reckoning.

The good news is that pursuing the foreclosure remedy in connection with Florida commercial real estate has an upside.  If structured like typical commercial real estate credit facilities, the loan-to-value ratios should allow for a recovery – either a complete recovery or very close.  As opposed to the “Great Recession” of 10 years ago, a market meltdown has not accompanied the delinquencies this time, at least not in Florida. yet.  This alone should serve as notice that any actions you are ready to take need to be mobilized and pursued promptly.  Chances are you did plenty during the forbearance period to get borrower performance – full or partial – going again.  Yet, it proved unsuccessful; not really because of your own doing, but simply, as I explained at the outset, because many months of non-payment invariably rendered non-performance a part of life.  Realty check: You need to take action.

Our firm handled defense years ago.  We know the tactics and goals of borrowers and their counsel.  As plaintiffs’ counsel, we also don’t accept or take these maneuvers laying down.  We hustle; we push forward to get our clients claims scheduled and heard so that legal entitlement is recognized and enforced.  Simply put, we fight for our clients.  We fight to protect and defend your loan investments – especially during these challenging times.  

As founder of this firm – and a former Big Law partner (at Greenberg and Akerman) – I direct our boutique firm’s practice to focus on helping managers and owners of distressed Florida commercial real property portfolios by way of negotiating and formalizing loan workouts, commercial foreclosure lawsuits, commercial evictions, and REO closings STATEWIDE.

If you’re looking for experience and a “laser-like” practice focus, or you have questions, need practical guidance, or are perhaps looking for an agile, experienced, and knowledgeable legal team to take the assignment and run with it, please give us a call or contact me directly via email at: carlos@reyeslegal.com.  Lastly, if you know other asset managers, private lenders, and/or investors that could be helped by the information in this blog, please feel free to forward to them the blog link (or the email with the newsletter that contains the link as well).

At the Reyes Law Group, we not only defend your investment, but preserve your rights, and value our clients’ trust every single day.

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Reyes Law Group

Reyes Law Group represents clients in a multi-disciplinary legal practice involving real estate transactions and litigation with a “footprint” that covers the State of Florida. Over the firm’s first 10 years, Reyes Law Group has closed over $100M in commercial closings, representing buyers and sellers in contract negotiations, due diligence, and the related title review and policy issuance related to closings. In litigation, the firm has commercial litigation experience focused on prosecuting or defending claims such as breach of contracts, partition actions, trade secret violations, and breach of non-competes. However, our firm’s MAIN FOCUS is assisting asset and loan portfolio managers, investors and private lenders with a “ 4-PILLAR APPROACH” to the legal challenges they face with non-performing assets: 1) LOAN WORKOUTS; 2) COMMERCIAL FORECLOSURES (across the State of Florida); 3) COMMERCIAL EVICTIONS; and 4) REO COMMERCIAL CLOSINGS.30+ years’ legal experience means - WE CAN HELP!

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