Inside the Largest Mall Transaction of 2020: The $1B Starwood Restructuring

March 2020. COVID had been declared a national emergency four days earlier. Retail traffic had collapsed almost overnight, and every major mall operator in the country was on the phone with their lenders trying to figure out what came next. I got a call from a contact in Tel Aviv.

The situation was this: Starwood Capital Group held a portfolio of seven regional malls spread across the United States, all of them encumbered by CMBS debt totaling approximately $1 billion. A portion of that debt — roughly $250 million worth of subordinate notes — had been issued in Israeli shekels and sold to Israeli institutional investors through the Tel Aviv Stock Exchange. Those bondholders were now watching their investment deteriorate in real time, in a foreign country, governed by a legal framework they didn't fully understand, with a special servicer they'd never met.

They needed a representative. Someone who understood CMBS, knew how servicers operated, and could navigate both the American legal system and the Tel Aviv District Court proceedings that would govern the Israeli bondholder claims. TG Capital Advisors was ultimately selected from eight bidders.

Why We Were Selected

The selection process was competitive and rigorous. The Israeli institutional investors — sophisticated in their own markets — were not looking for a general advisory firm. They were looking for someone who had been inside the machine. I had spent four years at LNR Partners, which at the time was the largest CMBS special servicer in the United States. I had sat on the other side of exactly this kind of workout. I knew how servicers made decisions, what levers they responded to, and where the real power sat in a CMBS capital structure.

That institutional knowledge was the differentiator. Understanding the legal framework mattered. But understanding how the humans inside a servicer actually behaved under pressure — that was what made the difference in a competitive pitch.

The Complexity of the Capital Stack

The structure we were working with was genuinely complicated. Seven properties, multiple CMBS trusts, senior loans that had been extended pre-COVID and were now being evaluated for further modification, mezzanine positions, and our Israeli shekel bonds sitting in a subordinate position — all of it governed by competing legal frameworks across multiple jurisdictions.

The question was never whether the properties had value. The question was whether we could stay solvent long enough to demonstrate it.

When we came into the mandate, collections across the portfolio had fallen to approximately 25%. Tenants had stopped paying. Some had invoked force majeure clauses. Others had simply gone dark. The senior lenders were watching closely — they had first priority on any recovery, and they had the legal tools to force a disposition if the situation deteriorated further. Our job was to make sure it didn't get to that point.

The Approach: Institutional Credit Discipline Under Pressure

The first priority was collections. Not dispositions, not restructuring negotiations — collections. We needed to know which tenants were genuinely unable to pay versus which tenants were using COVID as cover to avoid obligations they could actually meet. The analysis was granular and required direct engagement with property management at each asset. We built a tenant-by-tenant matrix across all seven properties: current status, lease term, rent deferral requests, financial condition where available, and our assessment of their ability to sustain operations.

The second priority was the senior lenders. We couldn't negotiate anything for our bondholders without first understanding what the senior lenders were willing to do. If they forced a fire sale, subordinate bondholders get nothing. So we invested significant effort in building a relationship with the lead senior lender and making the case for a workout rather than a liquidation. The argument was straightforward: the assets had real long-term value, the COVID disruption was temporary, and a five-year loan extension would allow collections to recover and give the properties time to stabilize.

That argument landed. We negotiated a five-year extension on the senior loans — the critical move that preserved optionality for every party in the capital stack.

The Result

Over the course of the engagement, collections recovered from 25% to over 95%. The senior loan extension was executed. The Israeli bondholders retained significant value in the capital structure rather than taking a total loss in a forced liquidation. The transaction was recognized as the largest mall restructuring transaction of 2020 — a designation that still carries more weight to me than the dollar figure, because of how dire the situation looked when we first got the call.

We negotiated a five-year extension on the senior loans — the single move that preserved optionality for every party in the capital stack and prevented a forced liquidation.

What This Taught Me About CMBS Workouts

First: controlling class rights are the most underappreciated power position in structured credit. The controlling class bondholder has the right to direct the special servicer on major decisions — which means if you hold that position, you are effectively steering the workout. Understanding where you sit in that hierarchy, and what rights attach to your position, is prerequisite knowledge for anyone who wants to be effective in a CMBS workout. We didn't hold the controlling class in this structure, but we knew who did and how to work with them.

Second: the senior lenders set the floor. In any distressed real estate situation, the entity with the most senior claim and the most legal tools sets the boundary conditions for everyone else. The most valuable thing you can do early in a workout is understand what the senior lenders want and build a plan that delivers it. If you can align with senior capital, you create room to protect subordinate positions. If you can't, you're negotiating inside a box that the senior lenders will close whenever they decide recovery is better than continued forbearance.

Third: speed matters more than perfection. COVID created a situation where everyone was making decisions with incomplete information. The managers who waited for perfect clarity — waiting until collections stabilized, waiting for the broader retail market to show a direction — lost negotiating leverage. The managers who moved quickly, established relationships with servicers and senior lenders early, and put a coherent workout plan in place before the situation forced one had dramatically better outcomes.

The Broader Lesson

I've now applied the credit discipline I developed at LNR and in transactions like this one to very different asset classes — cannabis real estate at Pelorus, small business seller notes at Seller Edge Capital. The assets are different. The legal structures are different. The counterparties are different. But the fundamental questions are always the same: What is the true value of this asset? Who has the power to affect that value? What do they want, and how do we build a plan that delivers it? The specific market changes. The framework does not.