The Charge of the Light Brigade Meets a Restaurant Short Sale

By: Jack Intrator

The parallels of Tennyson’s poem, “The Charge of the Light Brigade,” and the process of negotiating a restaurant short sale are many.  One could say orchestrating a commercial short sale warrants the same bravado as Tennyson’s Light Brigade given the complexities of such deals.

Each stanza of Tennyson’s poem tells a different part of the story, and there is a delicate balance between nobility and brutality throughout. Although Tennyson’s subject is the nobleness of supporting one’s country, and the poem’s tone is rousing, it pulls no punches about the horror of war: “cannon to right of them, cannon to left of them, cannon in front of them, volley’d and thunder’d”. 

For those of you who are aware of a typical short sale this article should give you a refresher but also a detailed understanding of a Commercial Short Sale, which is much different than a residential short sale.

This short sale involved a Tequila restaurant (name has been changed for purposes of this article) located in the suburbs of Philadelphia — a boon of operations and one of the most successful  within a chain of several restaurants and concepts developed by a well-known chef and operator. Unfortunately, several restaurants were opened at the same time in the same area and the economic downturn, lay-offs all took their toll on the market and especially the disposable income that is the lifeblood of every fast, casual, or themed restaurant, independent or chain operation.

The following illustrates the step-by-step process of an actual restaurant short sale, drawing on the comparison of the Calvary of the Light Brigade, and me the broker. For illustrative purposes, I am the Light Brigade — fighting to the death to get the deal done.

Taking charge

I originally took an exclusive right to sell listing for a restaurant. The chef and operator is one of the best in the region. He had several restaurants and opened several more at the same time, but the economic downturn had taken its toll on several operations and soon one restaurant was paying the freight on the other restaurants so a successful operation and economic viable operation were depleted to pay for the ones who were losing money and soon all were hemorrhaging.

I was called in to list a property and soon found out there were major issues with the liquor license, deferred maintenance issues and even some structural problems. I only learned of these after  inspections took place.

After months of negotiations with prospective buyers and offers received were not anywhere in the range of the asking price, we came to a point where there was an offer for a non-restaurant use.  An engineering firm was interested with the intent to eliminate the kitchen, bar and prep facilities and transform them into a viable office use. It was the location that made the deal not the use as a former restaurant. The buyer, an engineer, was probably in the best position to deal with the property and all its issues and defects. He was not afraid that the second floor had sunk by eight inches due to water seepage into the basement; he was ready to roll up his sleeves and deal with the issues at hand.

The stage is set for the Short Sale: Ride the Gallant 600. We did not know the details of all the problems we would encounter but we did know it was a task we needed to do.  It was my job to charge forward. We knew we were not told about all of the issues — of all three loans and the specific circumstances and details as the owners themselves were unsure of the specifics.

Half a league, half a league,
Half a league onward,
All in the valley of Death
Rode the six hundred.
‘Forward, the Light Brigade!
Charge for the guns’ he said:
Into the valley of Death
Rode the six hundred.

I found out there were two banks involved in this transaction. One bank we shall call “Aqua Tributary,” held the first mortgage position and their claim was for a huge amount more than could actually be attributed to the loan. The second bank, which was much more reasonable held a cross collateralized note on this property “ A Tequila Restaurant,” and another property in the operator’s portfolio, which we will call Sun and Moon Restaurant.  In any case, they had a very large note and this mortgage face amount as this property was cross-collateralized by the second bank which was in first position on the Sun and Moon restaurant.

As it turned out there was also a third note, by the former owner of the property and the balance remaining was for around $50,000.00

All the players knew in order to facilitate a sale we would need a clean title and that in turn required all sides to take a hair-cut but we were going in blind as one party was not communicating with the next. We had to go through seven layers in communication at the banks as well as many attorneys who all wanted their clients to get the most out of the deal as possible.  Soon we were fired on from all sides.

Flash’d all their sabres bare,
Flash’d as they turned in air
Sabring the gunners there,
Charging an army while
All the world wonder’d:
Plunged in the battery-smoke
Right thro’ the line they broke;
Cossack and Russian
Reel’d from the sabre-stroke
Shatter’d and sunder’d.
Then they rode back, but not
Not the six hundred.

Overcoming obstacles

We had to sort out all the facts, and finally it came down to an acceptable agreement of sale, the Aqua Tributary claimed they were owed over $300K but they refused to provide details as to how they got to this amount. The Second bank agreed to a release as they knew they had the other property but they wanted a sign-off from the owners that they would not challenge the sheriff sale on Sun and Moon Restaurant. The owners had some reservations as there were deficiencies and after a very assertive negotiation they agreed to a mutual release.

So, one bank down, Aqua Tributary Bank and the previous owner to go.  In many short sales the bank in first position is very reluctant to provide anything to a second and especially a third position note.  But without releases there would be no clear title and no release, and therefore no sale.

The bankers were cavalier to the extreme that they took their hardened position and laid there cannon to bear. All in the guise of one pencil pusher or another, they had differing views, communication and instructions from their top echelons and through the general ranks they were not offering compromises on the third position at all.  Many would have given up and said, take it to a Sheriff sale but that was not my task, not my mission. I had to ride on, to and through all the obstacles the Cossacks had put in my place.

Cannon to right of them,
Cannon to left of them,
Cannon behind them
Volley’d and thunder’d;
Storm’d at with shot and shell

Finally, we got down to the points of the negotiations. The posturing continued from one asset manager in the bank to the managers and Vice Presidents, compromises were called but at each juncture they only provided cursory suggestion. Every inch of ground was fought for and the men of the 600 hundred were driven beyond exhaustion. Offers, of $1,000.00 based on the $48K owed, then they at my prodding the third position the former owners through their attorney and conference calls with them, agreed to take $28K of the $48K owed and again the bank said no, in fact negotiations broke down on several occasions. And after a time, $28K went to $20K from the third position and the Bank again said no.  No matter how many volleys I had fired at them. No matter how many charges the bank would not agree to a compromise, except they went from $1,000.00 to $5,000.00 to $10,000.00. Then all negotiation ceased with the bank and the buyer getting dejected as to the whole process. I convey this and in the end, the bank sent a volley of cannon shot in my direction: they wanted to go after my commission!

While horse and hero fell,
They that had fought so well
Came thro’ the jaws of Death,
Back from the mouth of Hell,
All that was left of them,
Left of six hundred.

They said if the deal is in danger of total collapse then we will provide one and final offer. We will give the former owner $15,000.00 but you Jack and Aptcor need to provide 1% of your 6% commission to make the deal. I worked so hard to make this deal. Charged into the valley time and time again to make this deal and the buyer called me and said you should give up a point. It was me who had to give up the percent to make the deal and to bring all sides to the table.  I just could not believe that after I practically moved mountains, I was asked to give up something more. In the end, I did agree to give up 1% so we could clear title.

So now we are at the point where we have a signed written agreement, have a signed deal extension and have an agreement by Aqua Tributary Bank, the Second bank, the former owners and their attorney. But as usual there was a sign off by the owners and the bank, the language was onerous, for the owner, the bank wanted the owners to sign a release that they would not agree to be able to challenge a deficiency judgment, leaving themselves defenseless from any future litigation should Aqua Tributary decide to create an action.

The compromise offer by the owner was they would just change the language and all should be accepted. The bank responded that all communication and negotiations shall cease. The owner who was an attorney reached out to the bank’s attorney and no response. Weeks passed and the buyer was ready to walk. I called the attorney for the bank and was told he was directed not to return the calls from the seller.  I explained per the extension the deal was in danger of collapse and until I make that clear, they did not respond. Then, at the eleventh hour, the last week of the extension I was notified there was a new account manager and the bank without communicating had transferred responsibility to another person — the seventh person to deal with at the bank. We finally, on a Friday afternoon, facilitated the conversations and came to an agreement and the deal closed four days later.

When can their glory fade?
O the wild charge they made!
All the world wonder’d.
Honour the charge they made!
Honour the Light Brigade,
Noble six hundred!

At the end, our hero fades from memory of the scene as both the banner men of each side declare it was they who won the valiant battle dear, it was their cunning after all who made all sides come to heel, but for the broker, the valiant on his charger, quickly fades from the memory and those boastful men from the buyer to the bank attorneys claim the glory for themselves.  So rides one of the last of the Light Brigade, as so often it seems, the broker vanishes from the scene and glory fades for the knight on his steed of the valiant six hundred.

Jack W. Intrator CPM, RAM, ARM

Retail and Restaurant Leasing Specialist

Master Broker for New York Bagel Café

Tenant Representation and Lease Negotiation

C. 610-805-3849


One Response to “The Charge of the Light Brigade Meets a Restaurant Short Sale”

  1. Your tenancity and Tennyson are commendable.

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