Complexity Is the Opportunity. Binary Thinking Is the Trap.

Shlomo Chopp, Managing Partner of CASE, joined host Kevin Choquette for episode 37 of Offshoot: The Fident Capital Podcast. Choquette is the founder of Fident Capital, a San Diego based real estate capital advisory firm, and Offshoot is his long running interview series with real estate and business operators. The full episode is available on Apple Podcasts and Spotify.

The hour covered what CASE Equity Partners does, where distress is concentrated in 2026, and the part most borrowers skip: the operating consequences buried in documents they already signed. What follows is a summary of that conversation.

What Does a Distressed Commercial Real Estate Advisor Actually Do?

A borrower side workout advisor translates between the operator and the lender. CASE is roughly ninety percent distressed advisory and ten percent selective opportunistic investment, currently working about twenty loans representing more than two billion dollars of debt. The work is not litigation and not receivership. It is preparation, positioning, and negotiation on the borrower’s behalf.

Chopp put the translation point plainly. “It’s really understanding the language other person is speaking,” he told Choquette, comparing the operator and lender gap to two cultures reading the same gesture differently. The lender has no visibility into the asset, and when the lender does not trust the visibility the borrower provides, the negotiation is already broken. “You need to not only give them the visibility so that they feel comfortable with you, but you got to allow them to come to the point where they’re aligned with you in what the property needs.”

Opportunity Lives in Complexity, and the Challenge Is Binary Thinking

The framing that gives the episode its title is a screen for deals, not a slogan. “The opportunity is when you can take a problem that other people view as insurmountable and therefore don’t want to focus on it. And you could focus on it, identify what the problem is. That’s step number one. And then be able to solve that problem.”

The trap is the opposite posture. “If you want the next guy to take a loss, do you think he’s an idiot?” Chopp asked. “If that’s your business plan, that’s not gonna work.” Winning through leverage alone is not value creation. “Not through brute force. I’ll give you X. If you don’t take this deal, then I’m walking and he doesn’t have anyone else to go to. That’s great that you succeeded despite yourself. You’re really not adding value.”

He also inverted a familiar broker maxim. “People talk about, you know, time kills deals. Time doesn’t kill workouts. Actually, time makes workouts. People realizing what’s going on makes workouts.” His image for pushing too hard: “It’s like a seat belt. The more you tug on it, the tighter it’s going to be.”

Game Out the Lender, the Market, and the Appraiser, Not Just Yourself

Most owners game out one perspective, which is their own. Chopp described a wider decision tree that includes the lender’s likely response, what brokers and broker opinions of value will say, what the appraiser will conclude, and how all of that feeds back into the lender’s decision. “Then you need to say to yourself, okay, what if this happened? Then you go and deal with it from there.”

He is candid that this is where most engagements fail before they begin. By his count, “I’d say seventy percent of real estate owners, by count, cannot go through that process with us.” The borrowers CASE can help are the ones willing to do the analytical work, and the goal is to build a plan that turns the property around in a way the lender can defend internally. CASE has seen lenders reverse an aggressive posture once the borrower was reframed as part of the solution rather than the cause of the problem.

That reframing has a rule attached. “If you come to the table, you better be prepared with an explanation as to what happened, what’s happening or what needs to happen moving forward,” Chopp said, and if the borrower caused the problem, “you don’t get to capitalize on that problem, at least in their eyes.”

Argue the Inputs, Not the Outputs

This is the most transferable tactic in the episode. When a special servicer refuses to counter and simply asks for a higher offer, the borrower who keeps bidding is negotiating against himself. Chopp’s answer was to stop trading numbers and start debating assumptions.

“I’d argue the inputs, not the outputs,” he said. Rather than pushing a price, he brings the servicer into a conversation about leasing challenges, tenant improvement dollars, broker opinions, and what the asset actually needs. He supports it with a book style package on the asset that looks at it from multiple perspectives, and he was explicit that the audience for that package is not only the servicer: “My purpose of giving him the book was not necessarily for him to read it, but rather to deal with the appraiser, to make sure the appraisal came in at the right number as well.”

When the counterparty refuses to engage at all, he described a rarely used reset: offering to sign the deed over, and meaning it. “When you’re begging for something and the other guy’s got all the power and you could take away his power and say, hey, I’ll give you the deed and you really mean it,” the counterparty has to make a decision. He was careful to bound it. “I don’t do it often. I only do it when you’re a miserable introvert and you don’t want to talk to me.”

Speed May Close Deals, But Speed Kills

Asked what advice he would give a developer over a beer, Chopp went straight to origination. “The best advice I could give is to say, speed may close deals, but speed kills.” Loan documents deserve meetings, not turnaround times. “What does that paragraph mean? How does it imply? Okay, let’s run the model based on that scenario.”

His worked example is a CMBS cash trap, and it is the clearest illustration in the episode of why clause level detail is worth real money. Assume a trap triggers below a 1.25 debt service coverage ratio and releases after two calendar quarters at 1.30 or better. If income recovers on February 1, the next full calendar quarter does not begin until April 1. February and March are trapped, then two more quarters have to run. “You literally got six months plus six months plus two months to get to the start of that quarter before you can start getting your cash back.” Eight months of cash sits in a box instead of six.

Negotiating six consecutive months rather than two calendar quarters fixes it, and Chopp’s point is that the concession is almost free at origination while nobody is watching. “Your attorney is like, oh, what does it make a difference if it’s monthly or calendar quarter? Give them a calendar quarter, no problem. We’ll get another five bips on rate.” His verdict on that trade: “The rate’s not as important as that,” because on a net present value basis the trapped cash costs more than the spread. “Most borrowers don’t game out their loan doc clauses, and you need to.”

CASE has written separately on how CMBS cash management mechanics work in practice.

A Non-Recourse Loan Is Not Really Non-Recourse

Choquette raised the above the line versus below the line distinction Chopp has written about, and asked whether a non-recourse loan even exists. The answer was structural.

“At its core, every single loan has a guarantee. There are just carve outs to that,” Chopp said. “Deep down beneath everything is a guarantor and a guarantee. And you just need to make sure that the scotch tape and chewing gum that you use to patch up the hole at the bottom of your ship is actually going to hold.” His compressed example of how ordinary an activity can be: a borrower who finances an LED lighting upgrade and trips a prohibited indebtedness covenant. “Oops, full recourse.”

Then he walked the rolling version, and it is the story that should make every owner reread their reporting section. A borrower withholds a problem to avoid a cash trap, which either falsifies financials or surfaces later as a clawback demand payable out of pocket. The money is already spent, sometimes on the building itself. A $750,000 demand arrives. The borrower refuses to pay, the lender moves to foreclose, and the borrower mounts a defense his documents define as frivolous, which triggers more recourse. “Ultimately loses the asset over 750k because he never decided to read his documents.” His assessment of that borrower was not unkind, which is what makes it land. “You were a good operator, but you didn’t read the rules of the game.”

Sometimes the fix is early and cheap. “Like sometimes, with one phone call, I will save guys buildings. All it takes is one call and you tell the guy, watch out, read your docs.”

He was equally direct about the advisors who default to the courthouse. “There are guys out there that call themselves advisors that actually advocate bankruptcy,” he said, and the reputational cost compounds. He described an owner who filed, then months later saw an unrelated CMBS financing pulled because the controlling class holder recognized his name on the org chart, forcing him to fund several million dollars more through a different loan. “You become persona non grata.”

Where the Distress Actually Sits: Operator Quality Times Leverage

Chopp declined to reduce the market to a list of bad asset classes, on the grounds that the obvious answers are already priced in. Office is hard, multifamily underwritten at the 2021 and 2022 peak is hard, and, as he put it, “if you financed on a bridge loan to acquire in the south in 2022, that you probably are in default multiple times over and triggered recourse with those predatory loan documents.”

The variable he thinks matters more is operator behavior. He drew a distinction most capital stack analysis misses: a good operator is not necessarily a good general partner, and a bad operator is not necessarily a bad general partner. An owner can deliver a strong multiple to limited partners while decaying the asset, and the lender is the one holding the maturity at the end. He also flagged assets where owners took advantage of high rates to return capital instead of reinvesting.

The screen he offered is simple to apply. “If you’re a good operator, you’ve maximized the potential of the asset. If you’re a bad operator, you haven’t. And if you tie that directly to leverage levels, that’s where you find the most distressed.”

The Fourth Inning of a Scoreless Game

Asked where the cycle stands, Chopp offered a baseball analogy that is less about timing than about the absence of resolution. Buyers are hitting, owners are playing the field, “we’re in the fourth inning,” and “every single ball we’ve hit has gone to the track and caught at the track.” Nothing has scored. “It’s a scoreless game. Any wins we’ve had has been bunt, sacrifice bunts, sacrifice flies.”

His concern is what happens when the game finally breaks open. Finance is a closed loop, and much of the capital waiting to buy is tied to allocators still expecting recoveries from existing loans. “The more market price discovery we’re getting and the more losses are gonna be materialized, the less bullish some of that capital in the market is going to be.” He noted the evidence is already visible in deals that have come to market and failed to clear at assumed pricing. “So far there haven’t been that many substantive resolutions. There’s been a lot of kicking the can, a lot of delaying, but not a lot of substantive resolutions.”

He added a second correction to the discount narrative, which is the obsolescence premium. Comparing a distressed basis to a prior peak means nothing until renovation cost is layered on and the total is measured against replacement cost. “Pretty soon the discount ain’t really that big of a discount.”

For CASE's own posture, he wants exposure at the front of the market rather than the back. “I want to deal with the head, not the tail. Because if something’s going to pop, I want it to be my deal.” His preferred image is not a shotgun approach to loan pools but a sniper “shooting at a moving target. So you got to lead it.”

The Closing Advice: Read Your Documents Before You Need To

Given the last word, Chopp did not pitch. He gave homework.

“Whether you’re in distress or not, if you haven’t done this yet, take your loan documents, give it to an attorney to review, tell them to come back to you and talk about every single paragraph in it. You want to have a four hour meeting. You want to talk through how you need to operate your property.” His reasoning is that silence today is not consent tomorrow. “Even if the lender didn’t call you on it, if there’s ever an issue, they’re going to point to it to come after you from the day that something happened.”

Then the parting example. A client’s carve outs provided that failure to adhere to every term of the reporting section triggers full recourse on the loan. A day late, or financials that do not conform to GAAP, is enough. “Judges tend to enforce documents as they’ve been agreed to.”

His last line was about attention rather than markets. “The problem with go go times is that you don’t watch your flank. And then all of a sudden, boom, you’re folded up.”

Frequently Asked Questions

What does CASE do?

CASE is a distressed commercial real estate advisory and investment firm, roughly ninety percent borrower side advisory and ten percent selective opportunistic investment. The team works on complex loans, including CMBS, agency, and bank facilities with cash management provisions, and is currently engaged on about twenty loans representing more than two billion dollars of debt.

What does it mean to argue the inputs rather than the outputs in a workout?

It means moving the negotiation away from price and onto the assumptions behind price: leasing timelines, tenant improvement cost, broker opinions of value, and appraisal inputs. Servicers who will not counter an offer will often engage on assumptions, and the resulting record also shapes the appraisal.

Is a non-recourse loan ever fully non-recourse?

No. Every loan has a guarantee with exclusions, and carve outs under which those exclusions fall away. Ordinary operating decisions, including financing equipment or delaying financial reporting, can trigger recourse, and a defense a court deems frivolous can trigger more.

How does a CMBS cash trap release actually work?

Release is usually tested on calendar quarters rather than consecutive months, so a mid quarter recovery can add two extra months of trapped cash before the clock even starts. Negotiating a consecutive month test at origination, along with monthly reporting, can be worth more than a rate concession.

Listen to the Episode

The Spotify player sits at the top of the page on layout A. These links cover the rest.
• Apple Podcasts
• Spotify
• Episode page and full transcript on Fident Capital

Credit and thanks to Kevin Choquette and Fident Capital for the conversation.

Quotations are from the transcript published by Fident Capital and have been lightly cleaned for readability without changing meaning.

To discuss a loan or property situation with CASE, contact us.