Help developers and building owners secure loans, and lenders avoid losses
(Source: Globe and Mail)
Last fall, Leor Margulies and his partners at the Toronto law firm Robins Appleby & Taub LLP could see the effect the global credit crunch was beginning to have on the commercial real estate industry – and they figured that the situation would only get worse this year.
Financing for new projects and existing projects with mortgages coming up for renewal suddenly dried up faster than a bead of sweat on a Tim Hortons’ griddle.
Collateralized mortgage-backed securities, which had supplied 25 per cent of commercial real estate financing in Canada, disappeared overnight.
At the same time, banks began cutting back on the mortgage financing limits they were willing to provide for any project, demanding significantly higher equity and raising interest rates – if they were willing to lend at all.
As a result, hundreds, if not thousands, of projects have been put at risk for lack of financing. Scores of lenders have been looking for ways to recoup loans without having to resort to power of sales or foreclosures and the accompanying prospect of wholesale losses. Good loans coming due have become as much at risk as those in default.
For Robins Appleby, the dire situation sparked a business opportunity: The launch of a legal service to help developers and building owners secure financing, and lenders avoid losses.
It has set up a new six-lawyer real estate and investment advisory unit within the firm to specialize in finding innovative ways to get around the credit crunch. They say it is the first service of its kind in Canada and is already drawing clients.
Read Terrence Belford’s full article “New legal service takes on credit crunch” in the Globe and Mail (April 14, 2009).