Bankruptcy Reorganizations Increasingly Utilized by Commercial Real Estate Loan Borrowers

“Over the past few months, we have been seeing an increase in Chapter 11 bankruptcy reorganizations as a tool utilized by commercial real estate borrowers in their negotiations with lenders,” stated Kevin M. Levine, Executive Vice President of Peak Asset Solutions ( “More and more loans financed on a short-term basis of 5 to 7 years are maturing, but lowered property values are a barrier to refinancing,” he said. “So if the borrower and lender cannot come to agreement and the lender is threatening foreclosure, the borrower may have no alternative but to seek bankruptcy court protection. The automatic stay resulting from the bankruptcy petition filing will buy time for the borrower to seek alternative investor financing.”

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