Author: Michael J. Sullivan, Esq.
The Supreme Court’s opinion in Radlax Gateway Hotel LLC, et al. v. Amalgamated Bank, which requires that real estate mortgage holders be permitted to credit bid up to the amount of its claim, will no doubt heighten interest in the “loan-to-own” strategy of purchasing debt to acquire the hotel. Through the court’s opinion mortgage holders will now enjoy a greater degree of certainty in gaining control of hotel assets, particularly those having a value less than the mortgage holder’s claim. Moreover, by giving the mortgage holders the right to credit bid, the court’s opinion also works to limit the hotel manager’s risk of “rejection” of the management agreement based in the manager’s non-disturbance rights in the SNDA with the mortgage holder.