U.S. Bank & Wells Fargo v. Wilmorite (Eastview Mall $210M Foreclosure and Eminent Domain 'Debt Evasion' Fight)
U.S. Bank National Association and Wells Fargo Bank, through special servicer Rialto Capital Advisors, filed a foreclosure action on September 8 against Eastview Mall owner Wilmorite in New York County Supreme Court after a $210 million CMBS loan went unpaid at its final extended maturity date. Days before a September 28 public hearing on a Town of Victor plan to acquire mortgaged mall parcels by eminent domain and convey them to a Wilmorite-affiliated entity, lenders' counsel filed objections calling the plan a 'debt evasion scheme' meant to strip their collateral out from under the pending foreclosure.
Why it matters
The dispute tests whether a municipality can use eminent domain to help a defaulted borrower retain a property ahead of foreclosure, a maneuver that — if it succeeds — would give distressed CRE borrowers with cooperative local governments a novel way to defeat lender remedies. CMBS special servicers negotiating extensions with borrowers who have close ties to local officials should watch for this kind of parallel municipal action.
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