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The Changing Landscape
August 31, 2020 | Issue No. 15
Special Counsel | Real Estate

Although the long-term impact of the coronavirus pandemic is not yet clear, the social distancing requirements and health concerns, along with the shift towards remote working, reduced travel, and increased online shopping, will change the landscape of commercial real estate – in particular, offices, hotels and malls, which make up more than half of the mortgages in commercial mortgage-backed securities transactions.

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Partner | Real Estate
Associate | Real Estate

In Part 2 of our series on hotel financing in the wake of COVID-19, we take a look at some of the most common covenants in a typical hotel financing transaction.

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Special Counsel | Real Estate

In a recent decision by the United States District Court for the Western District of Missouri, Southern Division, the court denied an insurance company defendant’s motion to dismiss based on the assertion that COVID-19 does not result in “direct physical loss or direct physical damage” to real property because the same requires an “actual, tangible, permanent, physical alteration of property.” Instead, the court agreed with the plaintiff’s argument that the term “physical loss” may include the loss of use of such property and the suspension of operations thereon.

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Partner | Real Estate
Special Counsel | Real Estate

On August 5, 2020, New York State Governor Andrew Cuomo issued Executive Order 202.55 to provide additional relief to renters impacted by the COVID-19 pandemic and extended the time periods for certain other protections that had been previously granted to renters and property owners pursuant to Executive Order 202.8, as extended by Executive Order 202.28 and Executive Order 202.48. 

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Partner | Real Estate
Special Counsel | Real Estate

On August 3, 2020, in Shelbourne BRF LLC, Shelbourne 677 LLC v. SR 677 BWAY LLC, the Supreme Court of the State of New York (the “Court”) granted the borrower plaintiffs’ motion for a preliminary injunction and prohibited the lender defendant from proceeding with a UCC foreclosure until October 15, 2020. This is the second decision in New York which halted or delayed a UCC foreclosure as a result of the COVID-19 pandemic. While the Court did not expressly refer to the earlier case which granted an injunction to D2Mark LLC on June 23, 2020, temporarily preventing the foreclosure of the indirect equity interests of the owner of the leasehold estate in The Mark Hotel, the Court in Shelbourne reached a similar conclusion – that a UCC foreclosure may not be commercially reasonable and “that the equities of merely delaying the sale weigh in [the plaintiffs favor].” 

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Partner | Real Estate
Associate

In mortgage loan transactions, lenders will customarily charge a fee for late payments and additional (or default) interest upon a default. The late fee is often a percentage (e.g., five percent) of the unpaid installment and is meant to compensate the lender for its administrative costs in handling and processing the delinquent payment and for the loss of the use of such delinquent payment. Default rate interest, on the other hand, is an increase in the interest rate by a specified percentage in the event of a default and is meant to compensate the lender for its increased risk in dealing with a borrower that has defaulted. Default interest is also meant to compensate the lender for any lost opportunity cost in reinvesting the loan proceeds and for its costs in administering a defaulted loan. Finally, default interest serves as a deterrent to a borrower from defaulting a loan.

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Partner | Real Estate
Senior Attorney | Real Estate

A loan document’s notice provision is often overlooked as just another boilerplate provision in need of blanks to fill in. However, as technology changes, this section can be a minefield during the life of a 3 to 10 year loan. At a basic level, a notice provision needs to provide instructions for delivering notice, when notice is deemed delivered, addresses that will be reliable, and a method for the parties to update the addresses in the future.

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Here is a rundown of some of Cadwalader's recent work on behalf of clients. 

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Key Contacts

William P. McInerney
Partner
T. +1 212 504 6118
william.mcinerney@cwt.com

 

Duncan Hubbard
Partner
T. +44 (0) 20 7170 8525
duncan.hubbard@cwt.com

Fredric L. Altschuler
Senior Counsel
T. +1 212 504 6525
fredric.altschuler@cwt.com

 

Melissa C. Hinkle
Partner
T. +1 212 504 6972
melissa.hinkle@cwt.com

Holly Marcille Chamberlain
Partner
T. +1 704 348 5121
holly.chamberlain@cwt.com

 

Alan W. Lawrence
Partner
T. +1 212 504 6332
alan.lawrence@cwt.com

Jeremy Cross
Partner
T. +44 (0) 20 7170 8530
jeremy.cross@cwt.com

 

Bonnie A. Neuman
Partner
T. +1 212 504 5625
bonnie.neuman@cwt.com

Christopher J. Dickson
Partner
T. +1 704 348 5159
christopher.dickson@cwt.com

 

Matthew Robertson
Partner
T. +1 704 348 5257
matthew.robertson@cwt.com

Steven M. Herman
Partner
T. +1 212 504 6054
steven.herman@cwt.com

   
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