Question 1

What is the minimum size for note sales in the New York commercial real estate market?

Accepted Answer

The institutional note sale market in New York generally focuses on individual loans above $5M in face value, with most transactions in the $10M-$200M range. Smaller note pools (2-10 loans totaling $5-30M) are sold by banks looking to clear smaller problem loan exposures. Below $5M, note sales in New York are uncommon - banks typically pursue workout or REO disposition rather than note sale for small commercial loans.

Question 2

What rights does a New York commercial note buyer have against the borrower?

Accepted Answer

A note buyer in New York acquires all rights of the original lender under the loan documents, including the right to: declare default, accelerate the loan balance, appoint a receiver, commence a foreclosure action, and enforce any personal guarantees. The note buyer is bound by any existing forbearance agreements or loan modifications in effect at the time of purchase - these carry over. The note buyer can seek to negotiate new terms with the borrower, enforce existing terms, or proceed directly to foreclosure. New York's judicial foreclosure process (for most commercial mortgage liens) takes 12-24 months from filing to completed foreclosure sale.

Question 3

How are New York commercial note sale prices typically determined?

Accepted Answer

Note sale prices are expressed as a percentage of unpaid principal balance (UPB) or as a percentage of the estimated current collateral value. Performing loans at or above DSCR covenants trade at 90-100% of UPB (near par). Non-performing loans (in maturity default or payment default) trade at 50-85% of UPB depending on collateral quality, location, and estimated enforcement timeline. Deeply defaulted loans with impaired collateral (vacant buildings) can trade at 30-60% of UPB. New York office non-performing notes are currently trading in the 55-75% of UPB range depending on submarket and occupancy.