SAN DIEGO-Understanding the guidelines and restrictions of special servicers goes a long way toward working with them in distressed-assets situations, Shlomo Chopp, managing member of Case Property Services, tells GlobeSt.com. Case is a real estate turnaround company specializing in restructuring distressed CMBS assets.

“The challenge is most people don't know how to deal with the special servicers,” says Chopp. “There's not some kind of magic or anything mystical about it. There are specific guidelines they're beholden to: tax laws, trust documents, and the special servicer is very restricted in what they can and cannot do.”

Special servicers also have no motivation to resolve a loan, which is why they can seem vague and not eager to resolve these matters, Chopp points out. “They will never have negative pushback on them if they don't resolve a loan. They are told to foreclose as an option, 'but if you feel you can work out the loan, then do so.' It's a very difficult situation, and savvy real estate investors can feel as if they're coming up against a brick wall.”

Chopp, who spoke on a panel about distressed investments at RealShare Investment & Finance here earlier this month, says his firm guards borrowers with distressed properties to help them present deals that special servicers would accept. Seeking out firms who work this way is key to success at the bargaining table, he says. “Helping borrowers restructure is how you get a seat at the table in an off-market deal. Off-market distressed are the hottest words out there. We're involved in the basic negotiations, and we help with understanding the limitations of special servicers and the opportunities. It sounds complex, but it's really a matter of understanding all the variables in play.”

Case also recommends finding a representative who will dig deeper to find out all the variables and get the best deal possible for borrowing clients. “We don't reach out to the special servicer until we understand the full story,” says Chopp. “Go with someone who understands your property and can bridge the communication gap between you and the finance guy. The truth is somewhere in between, and you need to someone who can describe the issues you deal with on a day-to-day basis.”