Breakwater Equity just passed the $1 Billion dollar mark in workout project engagements. We thought it would be beneficial to our readers to look at some of the lessons learned while working through the myriad issues contained in over a billion dollars worth of commercial loans. Here are some of our favorites that come to mind.

Share all information about the deal early in the process, and keep sharing: Our ability to successfully negotiate with the various players in a workout is hugely influenced by the quantity and quality of the information we have about the situation. Many times clients unknowingly withhold vital information thinking that some pieces of information just simply weren’t relevant. Everything counts, so let us know. In addition, time is usually of the essence, so getting all of the pertinent documentation between the various parties is vital to us beginning the engagement.

Stay the course and be patient: We understand how worrisome workouts can be both financially and emotionally. Most clients are so eager to resolve the situation quickly and put it behind them, however, that they often end up negotiating against themselves. Don’t fall into this trap. Be patient and let us do the heavy lifting for you. Often times, waiting patiently is the best strategy even though it feels horribly wrong. And we’ll always walk you through the implications of any strategy that we employ.

Get on the same page and stay on the same page: For single owners or small partnerships, this typically isn’t a problem. For large tenant-in-common (TIC) ownership structures, this can sometimes be hugely problematic. Usually per the TIC operating agreement, each TIC member essentially has a veto right for any decisions that affect the TIC entity. Occasionally, lack of unanimity can severely negatively impact the ability to effectively manage negotiations with lenders or special servicers. A unified front, however, typically presents a much more imposing negotiating position. Working through everyone’s concerns can be enormously frustrating and time consuming. We recommend forming a steering committee and empowering them to make most decisions on everyone’s behalf.

Cut through the noise: Clients usually have long-standing relationships with advisors; lawyers, accountants, bankers… and oftentimes, many of those advisors are extremely knowledgeable in their specific practice area. All will have opinions, sometime strong ones, about how you should proceed with your workout. Get the facts on how many distressed situations each advisor has personally worked. There is simply no substitute for experience and track record with the regard to this highly specialized area of real estate finance. It takes a very well-rounded and experienced team to bring all the disciplines necessary into the strategy that has the best chance for success.

Be engaged in the process: Your insights and inputs into what strategy to pursue is vital to the process of a successful workout. Sometimes very important decisions need to be made that have potentially big ramifications for your financial wherewithal both now and in the future. Your active participation in the process is a key component to making the best decisions, for you, in resolving your distressed situation.