Pre-Development Loan: Strategic Exit Through Loan Sale

A $52.5 million pre-development loan was successfully resolved through a strategic loan sale, avoiding years of costly litigation and uncertainty. The property—a complex industrial site with multiple brownfield designations, zoning challenges, and an ambitious master-plan redevelopment—had stalled due to change of market conditions and sponsor indecision.

The lender held two positions in the capital stack: a senior secured loan and a preferred equity interest in an adjacent parcel. With valuations no longer supporting a traditional exit, and a borrower unwilling to cooperate, it became clear that enforcing through foreclosure or bankruptcy would erode both time and value.

By re-underwriting the collateral, assessing the sponsor’s litigation posture, and weighing the development risk, a decision was made to pursue a direct loan sale to a qualified developer-operator already active in similar transactions. The negotiation required managing competing interests and coordinating timing between the preferred equity and senior loan.

By re-underwriting the collateral, assessing the sponsor’s litigation posture, and weighing the development risk, a decision was made to pursue a direct loan sale to a qualified developer-operator already active in similar transactions. Importantly, the note buyer was sourced through my established network, ensuring a swift and reliable transaction. The negotiation required managing competing interests and coordinating timing between the preferred equity and senior loan.

The sale achieved a recovery well above market valuation, returning principal years earlier than a legal enforcement strategy would have. This outcome underscored the importance of recognizing when litigation avoidance—not escalation—creates the best economic result. Through decisive analysis and skilled negotiation, the lender achieved liquidity, mitigated downside risk, and exited a highly complex position with efficiency and foresight.