By Adam Gower
Receiverships, Restructures and Turnarounds: What You Need to Know During the Coronavirus Crisis
“The Coronavirus crisis has created uncertainty in the commercial real estate industry. Transactions have ground to a halt. An estimated 30% of tenants failed to pay rent on April 1st, a situation that is expected to become exacerbated come May 1st. As the number of distressed situations continues to rise, there’s growing talk of receiverships, restructures and turnarounds.
Receiverships, restructures and turnarounds – what do these terms actually mean? We look at each of the terms below, including what we’re starting to see in the marketplace already.
What is Receivership?
The concept of receivership is as old as time, dating back at least until British common law more than a thousand years ago. Back then, it was a mechanism for the court to be able to manage real estate and prevent feuding landlords from having the land lay fallow. Essentially, receivership is a process by which the property is turned over to an officer of the court until the dispute is resolved.
In recent days, there’s been growing talk of receivership in the wake of the Coronavirus crisis. The economy has stopped dead in its tracks, and as a result, many businesses have been forced to close. Tens of thousands of Americans are out of work. Collectively, this has caused many tenants – residential and commercial alike – to miss their rent payments. Some landlords, particularly those who are over-levered, are at high risk of defaulting on their mortgages unless rent payments start coming in again. Right now, it’s anyone’s guess when that might realistically happen.”
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