Investments

A loan was made on a large strip shopping center constructed on leasehold, in Keene, New Hampshire. The fee owner executed a subordination to facilitate the original financing. Years later the property was sold and a new lender provided the funds. Because the fee owner would not further subordinate, the lender purchased the original loan and placed a second mortgage on the property for the additional funds. Falling on hard times, the borrower defaulted and declared bankruptcy to delay surrendering the property. When the bankruptcy court allowed the foreclosure to go forward, the borrower found a new way to challenge the subordination itself. A local judge was intrigued enough with the argument that he restrained the foreclosure of the fee owner for more arguments. The borrower apparently had won additional delay.

We devised a strategy to wrest control of the cash flow away from the owners and get operational control of the buildings, the two crucial short term goals. We foreclosed only the second mortgage against the leasehold leaving the fee owner temporarily in place and subject to the first mortgage. This converted the cash flow from the borrower to us. We were then able to begin a leasing program and upgrading of the property while other litigation proceeded. Once the borrower was precluded from his funds for litigation, the remaining issues were settled easily and the lender gained full ownership of the asset, and it was sold to an investor.