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ARTICLE · 25 JANUARY 2024

How Valuation And Materiality Become Catalysts For CRE Litigation

Davis+Gilbert LLP
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An inescapable result of high interest rates and post-pandemic trends is downward pressure on commercial real estate valuations, especially in the office sector.

United StatesFinance and Banking
Joseph Cioffi
Joseph Cioffi
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An inescapable result of high interest rates and post-pandemic trends is downward pressure on commercial real estate valuations, especially in the office sector. Given commercial mortgage-backed securities and other deal structures in which control of the loan rests with the lowest priority interest that is in the money, reduced valuations will likely become the flashpoint for CRE litigation.

Parties seeking to shift control their way in these disputes may seek to rely on the judicially made-up standard of materiality recently developed in pre-financial crisis residential mortgage-backed securities (RMBS) litigation, rather than the parties' commercial understanding.

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