Working at workouts: Commercial Real Estate Debt in Distress Harvard Case Solution & Analysis

Working at workouts: Commercial Real Estate Debt in Distress Case Solution


Working at workout was the event in which the economic downturn had an impact over the debt securities and hurt the process of debt to maturity period for the borrowers. The main focus to overcome such event was to decrease the rentals due to the devaluation of the property over the impact of the economic crisis.

Under the case, drive property solutions was the practitioner of such an event. It was focusing on to overcome the bad debt figure that is caused by the default rate of the current borrowers under different circumstances, it was subjected to provide different methods in order to analyse the proper payments of debts and also determined the way to manage these debts under discounted value over the periods.

On the other side, North winds community crossing was captured in the list of default because it had less receipt of rentals and covered the high volume of debt under the obligation to pay. The interest rate was also high under economic crisis which was increasing the obligations to pay the particular amount of debt.

Whatever the changes in the ownership structure would decrease the default rate by reducing the level of payments under the terms and condition of the agreement.Burton properties was considered to be the main borrower of North winds community crossing.

Burton was not focusing on the interest of operating outlets after the event of economic crisis, so he decided to look for the purchase of property through certain debt. He also considered to take over the North winds community that he believed to be a new process to generate positive outcomes in the form of cash flows.

With his analysis of the new property that he wanted to purchase, he hired the personal banker of Colonial National for the contract. The main focus of Barton was to deal with the flexible payments through the stable interest rates with the additional prime rate of the principle amount incur through the interest payments.

After the critical evaluation of the new agreement of the property, it was decided by Burton that the current economic conditions are not in the favour of the borrower as interest rates are high along with decreasing trend in rentals. It is expected that tax rate remained high in order decrease the total value of property.

With the assessment of default over the period of payments, legal options might benefit to recover the loss of overpayments under the loan agreement and in order to overcome the potential loss, appointment of the receiver would happen which could reduce the level of default bt permitting the third party to negotiate the deal. This negotiation would happen on behalf of the owner which will evaluate the criticality of the deal with the help of experience and skills of third parties.

It is expected that under the terms, if the loan would not be paid in the full period of maturity then the property will be regain through foreclosure and this process will happen under the process of mortgage agreement. This process involves selling the property to the other party in order to get the rights of the mortgage.

Loan under default

Due to the economic crisis, the loan would be subjected to default by decreasing the level of rentals under high interest rates; it would also make to decrease the value of property taxes under the debt obligations. So such a disturbing phenomenon would shake up the actual figure with the expected one due to the change rate of interest plus the additional prime rate according to the demand of the property. There are some reasons of the loan to be defaulted:.................

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