Bankruptcy panel recap: Schechtman, Scharf, Fay, Tabak, Maltz
The Gap, which filed for bankruptcy protection this week, has a store at 122 Fifth Avenue (Credit: Google)
PincusCo Media hosted a video panel on the anticipated surge of bankruptcies expected to start later this year. The panel was held on April 30, from 2 p.m. to 3 p.m.
The YouTube link is here: https://youtu.be/Y1rcud9xi_s
Highlights:
-Real estate insiders are expecting a surge of bankruptcies later this year, with hotel and retail properties leading.
-The timing will be impacted by federal banking rules which have allowed for forbearance, which has reduced pressure on banks to sell loans
-The pandemic — which is the main driver of the surge — is also impacting the process.
Panelists:
David Schechtman, Senior Executive Managing Director at the brokerage Meridian Capital Group
Michael T. Fay, Principal, Managing Director, Chairman, U.S. Capital Markets Executive Committee at the brokerage Avison Young
David Scharf, Chair and Co-Managing Partner at the law firm Morrison Cohen
Eli Tabak, Co-founder and CEO at owner and financing firm the Bluestone Group
Richard Maltz, CEO at Maltz Auctions
The panel was hosted by Adam Pincus, founder of PincusCo Media.
Excerpts with time stamps on video:
ON VOLUME
Scharf at 01:35
A lot of displacement that needs to be resolved is going to get resolved in the boardroom as opposed to the courtroom.
Maltz at 10:25
In my opinion three to six times the volume of bankruptcy asset sales as there’s been in the last year, starting in maybe four to six months.
ON TYPES
Schechtman at 12:07
I think that the first bankruptcies that you’re going to see are going to be businesses where the real estate is ancillary.
Maltz at 29:05
I think the first to file are going to be the small mom-and-pop retailers as well as some of the larger retailers. I think I’m going to be changing locks on five locations a day if not more.
Fay at 57:01
It’s hotel and retail. That’s it right now. I mean hotel and retail are the ones that you’re going to see the most.
ON TIMING
Schechtman at 07:52
I have bankers saying to me, “We have to sell these [loans] but there’s one problem, Schechtman. I don’t have a regulator in sight. I’m gonna forbear my pants off. I have the federal government giving me mixed signals about whether or not they’re gonna give us the lenders any relief.”
ON PROCESS
Scharf at 16:52
Those concepts of typically going in, looking at assets, doing due diligence [etc. have been altered by Covid-19]… that’s going to have a profound impact on whether or not [bankruptcy] is a smart option but it’s also going to change the process and the way people think about it.
Scharf at 49:11
I have found special servicers — and the master servicers — actually easier to deal with, more receptive, more responsive than they were in 2009 to 2011.
ON INVESTORS
Fay at 30:32
There’s more capital in this market today than we’ve had. There’s a lot of DIP [debtor in possession] financing right now. We’re getting phone calls from DIP financing already.
Tabak at 37:38
You’re going to see a lot of the debt funds close up shop or have to raise capital.
ON LOAN SALES
Tabak at 20:38
We’re going to start seeing a big uptick in loan sales. The last thing a bank wants to
do is own a 6-story walk up in the Bronx with 40 apartment and have HPD [NYC’s Housing Preservation and Development] calling them in the middle of the night.
Fay at 40:45
Selling notes, [there is] a lot of confidential financial information. You’ve got to be careful of banking laws, and who sees it who doesn’t see it.
Schechtman at 42:51
A lot of these loans are sold in what we call a desk to desk transaction.