Commercial loan maturity negotiation strategies with bank

[Steve Lehnhoff]

Hello everyone. Long time reader, first time posting. Dire situation here, so I though maybe some people here would have some creative ideas for a solution.

The pandemic has hit real estate hard, and some of us harder than others depending on what type of properties we hold. I have two loans maturing on two commercial properties in a couple months. We have never missed a payment but to our surprise few weeks ago, our bank relationship manager suddenly told us that our loans were being moved to their Special Assets Group. I know what special assets mean and I have an idea of what could happen going forward. But special assets during this pandemic might not mean the same or trigger the same actions from the bank. Who knows what a bank is thinking and what they're doing internally.

The two properties - one is doing very well with strong revenue and income, even beating out competition in the market. The other property is not doing so well with revenues. But each property has been able to generate enough income to make monthly loan payments every month - which surprised us when they told us about being moved to special assets. Maybe the bank is just freaking themselves out and jumping the gun? Maybe they're having issues internally and want to offload as much loans as possible, even the ones still making timely payments but they "feel" is higher risk? The overall sentiment for my industry is that there are signs of recovery but won't fully recover until 2022 or 2023.

The LTV is around 60%. They want to see 2021 projections and the cash burn analysis, determine cash flow. They asked us what plans we have with the upcoming maturity. Basically they haven't outright demanded full payment and ending the relationship (yet). They want to see the 2021 projections, ask us what we want to do, and then decide. But they did ask if we are talking with other banks on possibly taking over the loans.

Any idea or advice on how to talk to the lender to reach the best possible solution for both sides? Here are some options I thought of. Any creative suggestions, or interesting proposals to piece together a solution would be greatly appreciated.

1. 1. Ask for another 5 year renewal (what we most prefer, and what we would have gotten during normal times). Probably not happening given their current tone. They want to break up.
2. 2. Ask for a short term renewal with additional equity injection if LTV of current appraised properties go above 60%. (I think this is the most realistic and ideal solution for both sides).
3. 3. Sell the worse performing property to pay off that loan. Ask for either full renewal or short term renewal for the better performing property.
4. 4. Go to another lender - not ideal, but if they want to push us out, we have no choice.

These are what I could think of so far. If anyone cares to share any ideas, or how they handled a recently matured loan or upcoming maturity they have, we could bounce ideas off each other. Thanks.