Distressed Office Buildings

Record numbers of employees are working from home. Office building tenants are giving back space. Interest rates and operating costs are soaring. Capital is constrained, and nearly a trillion dollars in commercial real estate and multifamily property debt is due to mature before the end of 2024.

It is a perfect storm for those with investments in office property—and one we are uniquely positioned to help clients navigate.

Our cross-disciplinary Distressed Office Buildings team brings together real estate, finance, leasing, zoning, construction, condominium, enforcement, bankruptcy, and tax lawyers with the experience and strategic thinking needed to analyze the most complex and demanding of situations and structures. We are helping clients across the country to protect their interests, and to develop and implement clear and effective resolution plans.

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Experience

Represented many of the largest lenders, special servicers, and bond trustees in the workout, enforcement, and resolution of a wide range of loans and projects having an aggregate value well in excess of $10 billion, including various office and mixed-use projects, involving a variety of restructuring and enforcement strategies.
Represented the trustee for large institutional investment funds as certificate holders in multiple lawsuits arising out of several credit-tenant leases involving a 19-story office building in the heart of downtown San Diego. The lending exposure was in excess of $130 million. The Ballard team prevailed on summary judgment in one of two related lawsuits, and resolved the second lawsuit, resulting in 100 percent of the principal loan balance ($130 million) being returned to the lender group, including default interest, as well as a 100‑percent recoupment of fees and costs.
Represented a lender in the workout of two cross-collateralized loans having an aggregate principal balance of $143.5 million. The transaction involved the lender obtaining title to the properties, entering into new leases and extending existing leases, and ultimately selling the properties to third-party purchasers.
Represented a large national real estate developer in the workout and restructuring of $450 million in CMBS financing secured by a multiphase, special-use property consisting of over 5 million square feet.

Represented a private equity company in litigation against Vail Resorts, Inc. and a defaulting borrower in Colorado State District Court stemming from the breach of an $18‑million real estate acquisition and development loan.
Represented a national bank in litigation against a defaulting commercial borrower in New Mexico Federal District Court, stemming from the breach of a multimillion dollar real estate development loan.
Handled lease exit disputes across the country involving a variety of property classifications, many of which were favorably resolved prior to litigation.
Successfully recovered billions in commercial real estate through judicial foreclosure, non-judicial foreclosure, and deeds-in-lieu of foreclosure and receivership actions and in guarantor claims through guaranty enforcement and other legal claims.
Successfully represented lenders and special servicers in single-asset bankruptcy cases across the country.
Represented lenders and special servicers with loans secured by office properties in connection with the appointment of receivers, deeds-in-lieu, contested and uncontested foreclosures, loan restructurings including in connection with infusion of new capital in the form of preferred equity and subordinate debt, loan bifurcations with hope notes, note sales, guaranty enforcements and settlements, borrower and top-down sponsor bankruptcies.
Represented owners of office properties in connection with joint venture agreements, subordinate debt to secure additional capital, tenant bankruptcies and lease terminations, zoning applications to change use, subdivisions and condominium creations of to facilitate partial sales, tax advice (including in connection with forgiveness of indebtedness), partner disputes, loan restructurings, negotiating DPOs, negotiating guaranty settlements.
Represented tenants of office properties in connection with negotiating rent and space reductions, negotiating additional landlord concessions, landlord defaults, landlord bankruptcies, negotiations with lenders pursuing foreclosures.
Represented a national bank in successfully negotiating distressed real-estate loan workouts in California, Colorado, Georgia, New Mexico, and Oklahoma.
Represented a commercial lender in litigation against various guarantors in Texas State District Court, stemming from the breach of a $20-million loan agreement.
Represented a special servicer and a large commercial mortgage company in connection with the workout and foreclosure of defaulted mortgage loans secured by office buildings in Colorado.
Served as Debtors' Counsel in business loan workouts, restructuring, and liquidation matters.
Advised Chapter 7 Trustees and liquidating agents in business liquidation and Ponzi scheme cases.
Counseled banks and financial institutions in real estate Chapter 11 reorganization and liquidation cases.
Served as Receiver's Counsel in business liquidations arising from enforcement actions commenced by Administrator of Colorado Uniform Consumer Credit Code.
Handled a workout and loan transaction involving an important regional distributor for a global manufacturing company. Negotiated and documented a loan secured by real estate owned by the principal/guarantor and amended other existing agreements. We also assisted the client in navigating critical intercreditor issues with the distributor’s primary secured lender.
Represented three entities in the Chapter 11 case of an energy company. For one of the entities, were able to successfully negotiate the post-petition termination of a real estate lease so that the property could be sold.
As lead counsel in a matter for a major residential mortgage servicer alleging violations of the automatic stay, violation of a confirmed Chapter 13 plan, and violation of the discharge objection, obtained a favorable verdict, awarding no damages to the plaintiff, after a three-day bench trial. The Bankruptcy Court reported two opinions in this matter. Ballard Spahr also obtained an order denying, in its entirety, counsel to the plaintiffs' petition for fees exceeding $270,000.
Represented secured lenders in single asset bankruptcy cases pending in Maryland, Virginia, and Delaware.
Represented secured lender in Inner Harbor West Chapter 11 bankruptcy case, obtaining dismissal, and, ultimately, obtaining $40‑million judgment against guarantors under springing guaranty as a result of the bankruptcy filing.
Handled the foreclosure and subsequent REO sale of an owner-occupied property complex in New Jersey that included an office building, a mixed-use building with offices, and an industrial component, in which the total debt was around $20 million. We also advised the bank in making minimal renovations so they could bring in a short-term tenant during the sales process, as well as in subdividing the property so it could be sold in parcels.
Handled the foreclosure of a Class B office building in Central Pennsylvania, including the collection of rents from tenants during the foreclosure process and negotiating consensual terms for tenants to vacate post-sale so that the bank did not have to act as landlord.
Handled the restructuring and workout of a distressed loan secured by a Class B office building in the Philadelphia suburbs. The facility was originally a construction line that was nearing maturity of the term-out permanent period. The borrower had a major tenant vacate and was never able to completely lease the building, so it was roughly 50 percent occupied for most of the restructuring period. We collected rents from the existing tenants and negotiated a structure that allowed the borrower time to secure refinancing, while also defeating the borrower’s lender liability claims.
Handled the restructuring of a distressed loan secured by Class B office buildings in Lakewood, NJ. Three buildings, one of which was occupied by a medical facility and another of which was severely fire-damaged.

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Featured Services and Resources

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Insights, News, and Events

This Summer, Center City's Office Real Estate Market Warmed Up

Strategies for Remediating Loan Defaults

The Sky Is Not Falling: Hope for Distressed Office Buildings, Despite Economic Challenges

Distressed Office Buildings: A Look at Workout and Enforcement

Resources

Distressed Office Buildings Brochure

Distressed Real Estate Brochure

Foreclosure and Receivership Process

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