Why You Must Plan Early in Loan Workouts
By Shlomo Chopp, Managing Partner
Don’t lose properties you could have saved, and waste dollars - valuable negotiation chips “in good faith.”
Take a page from the Pentagon’s playbook. They plan for every crisis—scenarios often worthy of Hollywood. Why? Because when chaos hits — it’s already too late to start scrambling for answers.
The harsh truth is that most real estate borrowers aren’t nearly as prepared as they think they are. They don’t understand their lenders, overestimate their leverage, and fail to prepare for negotiations. A workout can take two years, but decision time comes very quickly.
The lender has the lien, the law, and the leverage. They hold all the cards: deeper pockets, better lawyers, and, if you’re dealing with CMBS, most of top litigators are conflicted from representing borrowers.
The typical borrower will assume that the lender thinks like they do. They believe that showing good faith, trying their hardest, and coming to the table after exhausting all options will win the day. If they say “I did everything possible — let’s make a deal” the lender will of course click their heels together, salute, and exclaim “Yes Sir!”
Know Your Property:
What do you really know about your property that you can prove to someone who doesn’t trust you? Not just value—its true competitive position in the market. Do you know how your lender views it? What they think of its potential? Your potential? Their perspective matters more than yours.
Your Lender’s Playbook:
What do you know about your lender’s strategy? Their recovery options? Their decision-makers and advisors? Their incentives? What motivates them to lean one way versus another?
Do you know the types of deals they’ve accepted before, what they’re considering on other projects, and why? Can you predict how quickly they’ll act?
These aren’t academic questions. This is the battlefield of “hearts and minds! You need to understand your opponent—their tendencies, their likely moves, and their timing. If you don’t, you’re walking blindfolded into a fight. If you do, you can problem solve your way to success.
The Borrower’s Blind Spot:
Most borrowers don’t know any of this. Even seasoned professionals managing billion-dollar portfolios approach workouts with an oversimplified mindset. It’s not easy, and it’s not simple. But it’s necessary. If you cant, get somebody who can.
As Albert Einstein said, “Any fool can know. The point is to understand.” The same goes for picking an advisor - dont fall for the empty “I know a guy” line. Have the plan.
The Way Forward:
The odds are stacked against you—but the way through starts with preparation months before negotiations begin. Dig in, gather the right intel, and build a plan.
Most wars are fought over land, this is no different. Borrowers who treat preparation casually and seek to dictate terms, end up losing their properties and the money they’ve poured into saving them.
Don’t let that be your story.