We've seen a lot of transactions where they say a trillion,
maybe it's two to three trillion over the next couple of years that's coming due. And all these
banks have kind of kicked the can down the road. We've had maturity defaults and they're doing
that. And I'm seeing a lot of companies now losing their projects.
And there's people going in and buying the debt out of a discount and then obviously being in a
foreclosure auction and being in a much better position to buy that asset. And what I found curious
is that a lot of these banks, they're more likely to deal with another operator coming in to buy
these projects, obviously on the cheap, taking them out. And I've seen projects where there's a
really, really good operator in there that's operated it for a long time. But now the numbers just
don't work with the current interest rates and all that. And I just find it curious that these
operators can't go to another institution based on the current appraisal and the numbers and go to
the bank and say, look. I know you're owed, just pick a number, you're owed $100 million,
whatever the number is. And we've penciled this out. This is the highest appraisal we have.
We've been a great operator for 10, 15, 20 years. And I can't take you out at $100 million.
The highest I can get is $85 million. Take $85 million in cash and write the rest of this off.
And the banks won't do that. but they'll go sell it to another operator who's going to give them
the same $75 million and completely take that operator out.
I can't get my arms around that. You'll do almost a short sale, but you won't take the short pay.
Any thoughts on that? That's a good question. Again, a loaded question.
First of all, I'll tell you what we're seeing in the market and what's keeping us ridiculously
busy. We're putting hundreds of millions of dollars out. on exactly what you said but with a little
twist i think the real opportunity is we're seeing individuals or sponsors and institutions
purchase debt at a discount from a bank but then they're cutting deals with the borrower that's
what we're seeing those are the only deals we will get involved in we'll lend the money on
reposition the loan rebalance the loan recapitalize the loan as long as there's a new sponsor
coming in but there has to be some sort of like hand over the keys cash for keys but some sort of
arrangement we're not going through the foreclosure system especially if it's in a judicial
jurisdiction so there's already that deal set up but a lot of times think about what you're saying
for a moment like why would a bank like lenders come to me all the time they're like hey your asset
if I did a 50 million dollar deal your assets only worth 40 million now I could only pay you 40.
all right, pay me 40, but I'm not reducing my loan because who knows what that's worth five years
from now. So why would I ever just take $10 million off of a loan? It makes zero sense. You could
reposition the note rate, reposition the interest payments, reduce them, do some sort of back-end
interest. As far as getting new people to come in, it actually makes a lot of sense for the sponsor
because if a bank has, like you said, $100 million loan and they're now going to take 80, that
sponsor has $20 million in forgiveness of debt. And I don't know about everyone in this room, but
I'd rather have a bank chase me than the IRS. So there's a lot of reasons. What I think you're
saying is that they'll go to you and sell it to you, but they won't renegotiate with the operator.
We've had some really good operators that have been great operators. They won't deal with that
operator. They want to see the new kid on the block come in. They'll still take that haircut. And
we had a really good operator for some malls. Obviously, that's not a dirty word right now.
But they were a good operator. And exactly what you said was that forgiveness of debt came up and
all of that. But they just couldn't get them to say, hey, look, take 80,
but I'll take 65 from that. Yeah, but can't you make the argument if they're a good operator? Why
did they overleverage the asset in the first place? That's exactly what I was going to ask you,
John. Is that because it's a confidence thing? It's like, look, you put this thing in this
situation. Why am I going to bet on you again? You think that's sort of what that is? Yeah,
absolutely. It's a failed deal. I mean, no matter how you look at it, it's a failed deal. The
sponsor didn't perform. Like Office and all that. They've run it forever, and all of a sudden,
the vacancy rates are so high. You know, I didn't plan on that.
OK, I had good financing in place. You know, things have now changed. We had COVID. Let's look at
the office market. It just it doesn't pencil out to that value anymore. The fundamentals worked for
a long time. I can't necessarily say that's the operator's fault that now he's got these huge
vacancies. I think sometimes they say, like, you know, if you look around the table in a deal. and
there's no one else that looks like the big money. You are the big money. Sometimes the banks just
want the big money to come in. If something goes wrong, they're going to self-fix it. They're
going to be able to raise the capital from the street or just self-band-aid it and get through so
they don't have another headache on their hand 18 months from now after letting you get back into
the asset. Oh, something else went wrong. And now they're back at the distress table with them. I
think that's part of it, maybe. And they got to report to somebody, too. So, guys, thank you so
much. We got some great people up here. Please take your time. Talk to them. Wealth of knowledge.
And thanks, guys. Hi, I'm Richard C. Wilson. Our community has closed over $1 billion of
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