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Memories of the prolonged real estate down-cycle precipitated by the 2008 credit crisis are all too fresh.  The lessons learned during that turbulent time should inform future discussions between lenders, investors, and tenants, as each group navigates these uncertain economic waters over the coming months.  The short-term imperative is clear: the three tiers of the real estate pyramid must work together to mitigate this market disruption and ensure a soft landing once the crisis has passed and aggregate demand returns to pre-virus levels.

Hirschler’s real estate and restructuring teams have deep experience advising commercial real estate lenders, investors and tenants through up and down markets.  While each situation calls for bespoke solutions, here are some key considerations that should guide market participants over the coming weeks.


Be open to creative solutions.  It’s only been a few short years since lenders finally rid their books of the backlog of REO after the 2008 crash.  We doubt any are eager to take back keys from borrowers in the coming weeks. If legislative responses are effective, many tenants should live to fight another day, and those that do not may be replaced in relatively short order. But to get to the other side without an increase in REO, lenders must be open to creative solutions to manage short-term declines in borrower revenue that may impact loan repayment.

Be proactive.  Don’t assume all borrowers will come to their lender before cash runs short. Some will inevitably want to avoid an uncomfortable conversation. Memories are long: reaching out with a collaborative approach to borrowers with retail exposure now may reap big relationship rewards when the inevitable upswing returns.


Reach out to your lender first and be an open book. Borrowers should talk to their lender early and often. Open lines of communication will be key to optimizing results and shortening the time it takes to underwrite potential changes needed to keep your loan in good standing. It is always better to seek a modification than a forbearance after missing a payment.  Borrowers should also be realistic about their prospects and expectations. Overly rosy projections may lead to terms that borrowers can’t live up to.

Take the same approach with your tenants that you’d want from your lender. Tenants are the cause of and solution to landlords’ problems right now. This virus will pass, but if tenants are forced to wind up their businesses because they can’t pay rent, it will take even longer for new tenants to take their places once the cycle turns. The tenants that are able to weather the storm will be the ones who keep landlords afloat.


Call your landlords now. Just like landlords with lenders, tenants should be proactive in opening a dialogue with their landlords and realistic about their financial pressures and prospects.  Symmetric information is necessary for tenants and landlords to work collaboratively. Goals are aligned here – landlords want to keep tenants in spaces – so don’t treat this as an adversarial situation.

Call your lawyer to think through potential alternative funding sources. Whether it’s because of infectious-disease exclusions inserted after the first go-around with SARS, or “damage to the premises” coverage triggers, most business interruption insurance policies won’t cover COVID-related business losses. But each policy is different, and yours may provide coverage. Have a lawyer review your policy to see if you can make a claim. In addition, federal emergency relief funds under the CARES Act may help you keep your doors open.  Don’t skimp on the help you may need to secure these important sources of funding.

Contact a member of the Hirschler Recovery Team to discuss your options.

Media Contact

Heather A. Scott

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