CRE Investing and Debt Restructuring Checklist

CRE Investing and Debt Restructuring Checklist

COVID-19 is confronting every level of the U.S. economy with an unprecedented challenge. Given the mounting levels of corporate debt and the uncertain economic outlook, it’s no surprise that the Federal Reserve estimated that bankruptcy filings over the next 12 months will break records. But bankruptcy is hardly the only or best option for businesses hit hard by the pandemic. In fact, many property owners are planning their recovery by adjusting their capital structure to finance operations and/or to make improvements to property they own.

As we approach year end, many real estate investors are on the lookout for properties they feel will offer better and more stable returns in the future, with some thinking a 1031 exchange is an appropriate structure to think about.

Whatever the case, closing transactions in a timely manner often hinges on how well you tell your story, especially if considering a 1031 exchange. A checklist, like the one offered below, is a simple but effective tool for gathering the relevant information before you approach your lender or pursue financing.

Real Estate Debt Restructuring

Debt restructuring can be a productive part of a plan to manage debt and improve liquidity. Real estate debt restructuring depends on many factors — the debtor’s financial condition, the expected cash flow, and the relationship between the creditor and debtor. If you are considering refinancing existing debt obligations you will be wise to keep in mind that the process is meant to help both the creditor and debtor. The story you tell can facilitate, even accelerate, the process.

The following checklist will help you prepare your story as completely and persuasively as possible for real estate debt restructuring negotiations.

Essential documents:

  • Financial statements – CPA prepared with all footnotes (last 3 years) and/or
  • Federal tax returns (last 3 years), including K1s (if applicable)
  • Most recent interim balance sheet and income statement
  • Projections for next 24 months with cash flow detail (include rationale)

Also consider:

  • Background/history of operations
  • A personal financial statement for all principals having a 20% or more ownership interest
  • Resumes on key management personnel
  • Last three years’ personal tax returns to accompany each personal financial statement

Good information and reports to have available:

  • Sources and uses of loan proceeds
  • Details of existing debt situation (include rates, terms, collateral, guarantors, etc.)
  • Bank statements (last 6 months)

New Commercial Real Estate Investment

Just as with all real estate purchases, when you buy or invest in a commercial property, it’s your responsibility to ensure that property is a good investment. Your lender will want to know the details of that assessment. This expanded checklist is meant to help you gather and organize your financing information package in order to speed the process and present a complete financial picture for the lender or lenders you are approaching.

  • Current rent roll and historical occupancy
  • Copies of existing leases, contracts
  • Appraisal
  • Environmental reports
  • Title report
  • Survey
  • Note(s) and mortgage if refinance
  • Purchase and sale agreement (if applicable)
  • Primary (home) address, date of birth, social security number (for background check)
  • Property condition report

Your Team

Wherever you are on the recovery spectrum, CBIZ can help. Feel free to reach out to Michael Caron (610-862-2335) or the CBIZ Credit Risk Services team for a no-risk conversation or additional information. For ongoing coverage of the impacts of COVID-19 and actions to take to safeguard and stabilize your organization, visit our COVID-19 Resource Center and Accelerated Recovery Resource Center.

 

Roadmap to Transformative Growth

CRE Investing and Debt Restructuring Checklist~/Portals/0/PackFlashItemImages/WebReady/Debt Restructuring.jpghttps://www.cbiz.com/Portals/0/Images/Modified/Debt Restructuring-1.jpgAs we approach year-end, property owners are planning their recovery by adjusting their capital structure to finance operations and/or to make improvements to property they own. Closing transactions in a timely manner often hinges on how well you “tell your story”. This checklist is a simple but effective tool for gathering the relevant information before you approach your lender or pursue financing....2020-11-06T18:34:05-05:00

As we approach year-end, property owners are planning their recovery by adjusting their capital structure to finance operations and/or to make improvements to property they own. Closing transactions in a timely manner often hinges on how well you “tell your story”. This checklist is a simple but effective tool for gathering the relevant information before you approach your lender or pursue financing.