The Fort

#320 - Real Estate Real Talk: Personal Guarantees, Foreclosures, Bankruptcy, and Bouncing Back with Andrew Kirsh and Zack Streit

Nov 14, 2023

Real estate experts Andrew Kirsh and Zack Streit discuss personal guarantees, different types of loans and guarantees in real estate, negotiating loan and legal document origination, understanding covenants in commercial loans, strategies for dealing with financial trouble in real estate, and when to file for bankruptcy.

01:13:40

Episode guests

Zack Streit

Andrew Kirsh

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Quick takeaways

Understanding the differences between personal guarantees and non-recourse loans is crucial in the real estate industry.

Open communication with lenders, review of loan documentation, and seeking legal advice are essential in navigating financial distress and potential defaults.

Defaults and foreclosures can have long-term impacts, so borrowers should be transparent, provide explanations, and work with experienced advisors to improve their chances of obtaining financing.

Deep dives

Navigating Tough Situations in Real Estate

This podcast episode explores how to navigate tough situations in the real estate industry. The conversation focuses on personal guarantees and the different types of loans: non-recourse and recourse. While non-recourse loans provide some protection for borrowers if a project fails, there are still non-recourse carve-out guarantees that can hold borrowers accountable for certain actions. On the other hand, recourse loans allow lenders to go after borrowers for deficiencies in case of foreclosure. The discussion also covers the difficulty of obtaining non-recourse loans for new and less experienced sponsors. Negotiating loan terms, such as covenants, becomes crucial for borrowers to protect their interests. Lenders may tighten their requirements and enforce covenants more strictly, especially in the current market conditions. It is recommended for borrowers to communicate with lenders upfront, seek legal advice, and work with capital advisors to find solutions and strategies to navigate these challenging situations.

Lenders Scouring Loan Docs to Protect Themselves

01:13

Impact of Foreclosure and Defaults on Borrowing Ability

01:36

Introduction

2min

Different Types of Loans and Guarantees in Real Estate

14min

Negotiating Loan and Legal Document Origination

9min

Understanding the Look Back Period and the Challenges of Covenants in Commercial Loans

5min

Negotiating Terms, Defaulting on Loans, and CapEx Busts in Real Estate Deals

3min

Lender's Perspective and Dealing with Loan Extensions

5min

Strategies for Dealing with Financial Trouble in Real Estate

23min

When to File for Bankruptcy

12min

Artem Tepler sadly passed away on November 2nd, 2023. He visited me in Fort Worth and I'll never forget it. He was funny, and kind, and had a servant's heart. His story was infectious. I know he loved his daughter more than anything. That made up most of our conversation at lunch. Pray for Artem and his family. If you're able to give, there is a GoFundMe set up for his daughter, which can be found here: https://www.gofundme.com/f/artem-tepler

On this episode, I am joined by Andrew Kirsh and Zack Streit. Andrew is an experienced commercial real estate transactional attorney, whose clientele includes a broad spectrum of national, regional, and local investors, funds, developers, operators, syndicators, private equity providers, and lenders. Andrew’s practice involves all aspects of the real estate industry, including acquisitions, dispositions, equity investments, syndications, fund formation, development, leasing, financing, note purchases, and foreclosures.

Zack has 15 years of multifaceted commercial real estate investment and advisory experience, including as an equity capital provider, a debt capital provider, and a capital advisor. His 8 years of institutional principal investment experience laid the foundation for a career as a capital advisor, where he has co-founded a capital advisory platform and closed billions of dollars in commercial real estate ventures.

We discuss: