Shlomo Chopp is a New York-based commercial real estate restructuring specialist, investor and broker focusing on the complicated matter of markets under stress from mispriced, impaired or non-functioning assets. He says artificial intelligence can help with that complexity, but warns too much reliance on the technology can hold peril as well as promise.
The Brooklyn native is no stranger to new approaches: Chopp is a prolific inventor with a background in real estate innovation. His multiple patents address shopping center modernization with a focus bridging physical retail with digital commerce. That's why he takes a hard look and says real estate professionals and others shouldn't become AI addicted.
It's an outlook that's even more important as the managing partner at Case Equity Partners, known for his blunt views on capital‑structure risk, property obsolescence and the structural pressures weighing on commercial real estate, argues the industry is entering a difficult but necessary reset that will force reinvention rather than outright collapse.
Chopp has spent more than two decades working in commercial real estate, advising borrowers, negotiating with lenders and special servicers, and selectively investing when deals no longer perform as modeled. He has a sizable following on LinkedIn and X, where he writes frequently about market distress, capital misallocation and negotiations with lenders and special servicers. The following interview has been edited for length and clarity.
You’ve been pretty vocal about AI as a tool for individuals. How do you actually see AI changing underwriting, restructuring, and advisory work?
AI is an amazing tool, but I also believe that for the average business person, it could also be a bit of a drug. I'll give you example. Previously, if I had to send an analysis on something or write something up, I'd write up a paragraph, and it took me 40 minutes to perfect that paragraph. Now, I can have AI not only tell me about what I was going to say in the paragraph but give me six various additional levels of consideration and opportunity. But at a certain point, for me, I'm not going to let anything be sent out until it's vetted and it actually fits our narrative.
At the end of the day, you can’t abdicate your responsibility in business to AI. It burns brain cells. It’s like watching TV, ingesting so much data without processing it. And sometimes it just misses the point. It makes good points, but it's not the point you're trying to make. I'm in the negotiation business, which means I craft a narrative around every single thing, and every document that goes out, you have to check seven times about third degree, fifth degree implications.
How do you look at ongoing distress from the change in work patterns from COVID-19, AI and higher-for-longer interest rates? How do you look at that in dealing with distress at this point?
Real estate is a product of its tenancy and the tenants’ businesses are changing too quickly. The issue of commercial real estate is that its leverage levels are much higher than businesses, when it's actually derivative of businesses, and the property itself is literally the cupholder, it's not the actual coffee in the cup. I think that's the risk in commercial real estate right now as it relates to workouts and as it relates to loans. You have so much capital for new assets, for new investments right now. There's so much money out there. Yet there's so much distress, too. And many borrowers who have residual capital will chase their asset for a bit because they don't want to default. That has kept foreclosures at bay for a while. Lenders do a lot of extensions where borrowers put in additional capital. The lender wants the borrower to put up the reserve, because otherwise, why would they extend it? The challenges have been kicked down the road, which has gone on, not just by the lenders, but by the borrowers as well. And that is now coming to an end. And it's going to be really interesting to watch.
You’ve made some career moves from proptech sales to dealmaking and now to distressed situations. Looking back at the changes, what did you feel like were the riskiest?
I did have some pivots. In 2003, I started working in proptech, selling [company relationship management] software to real estate brokers and investors. Then in 2005, I started putting together deals. I wasn't traditionally buying, but I was just wheeling and dealing. In 2010, I started advising borrowers around resolving the distress. I cracked open the underlying CMBS documents to make a real estate argument that a lender could understand. Then in 2017, I quietly wound down that company and started acquiring assets.
Fast forward to 2020 when COVID happened and people started having issues with their properties. I was brought in to help on a few properties and sort of spun back up the [distress] business full bore. We’re working on about 20 different workouts with over $2 billion in loans. It's like drinking water from a firehose. As a result of expertise, we also chase deals. We own some bonds; we own some other assets. We look at the current market as the time when we should be buying similarly to all the people that did very well during the savings and loan crisis.
When you started looking at CMBS activity over 15 years ago, what concepts did you hold then that aren’t as useful today?
The last CMBS round was heavily controlled by controlling classes. If you were the controlling class, you basically dictated everything. You could hold up a resolution forever, and you could make a significant amount of money in control. That has changed.
Today, the rating agencies and bondholders have gotten smarter about protecting themselves in surveillance and are aware in real time as to what other bondholders are doing. Also, servicers are way more experienced in the dynamic in which a borrower, bondholder, intermediary navigate. You are able to walk into a room with a problem and say, ‘I've seen that before.’
As a result, it's easier to have a conversation today not only on the loan, not only on the property, but also on the bonds — all the pieces together. You can make a really good argument, understand everyone's needs and nuances. Then you could resolve loans.