Receivership Becomes More Attractive Option For Banks Developers Struggling In Economy
By Yudislaidy Fernandez
In the troubled real estate market, receivers are in growing demand as more distressed assets face need for a turnaround.
With many property owners expected to run into trouble with commercial loans coming due, receiverships could play a bigger role next year in stabilizing failing properties.
Court-appointed receivers take over the management of the properties, finish construction if the project was left incomplete and position the properties for lease or sale, explained Andrew Hellinger, chief executive officer of Liberty Pointe Advisors, a corporate turnaround and management consulting firm in Coral Gables. Banks rely on receivers to avoid bankruptcy and protect the property’s value.
"In many real estate cases, residential or commercial, there are issues of developer liability," Mr. Hellinger said. "The benefit of receivership is that it allows the project to be completed, repositioned and hopefully sold out without assuming the original developer’s liability."
In the past two years, he said, his receivership has gained more unfinished projects because of current market conditions. In those cases, the company has taken on several partially built developments, completing construction and marketing them for sale, he said, "so that bank’s collateral is being finished and hopefully sold."
For example, in Miami-Dade, the group has invested time and effort to resume sales at the Miami Airport Center, a 28-acre office and warehouse complex in Doral that the group took over in April. Two units have been closed and two more are under contract, Mr. Hellinger said.
"When we took the property it was some what neglected," he said, requiring immediate repairs and remediation so that tenants wouldn’t be in a neglected property and to appeal to prospective buyers.
Mr. Hellinger comes from a developer background. He formerly headed Leviev Boymelgreen Developers of Florida, but in 2007, as the housing market slowed, he decided to focus on real estate consulting and asset management.
The company is forecasting a bigger workload in 2010.
"We are preparing for more and more commercial projects," Mr. Hellinger said, as some banks are expected to make critical decisions on the future of many of the commercial assets in their books.
The potential for more receivership business has motivated a large commercial realty firm to set up a local receivership team and has attracted an experienced receiver to set up shop in Miami.
Commercial brokerage Colliers Abood Wood-Fay recently brought aboard a team of professionals to offer receivership services.
Colliers Receivership Solutions, led by Managing Director David Garfinkle, is to provide services such as comprehensive asset management, disposition of assets and marketing plans for leasing and sale.
Mr. Garfinkle and Adam Pollock, the group’s general counsel, are to act as court-appointed receivers performing duties such as collecting rents, paying expenses and maintaining assets.
"We want to provide lenders the complete solution to handle receiverships, property management, disposition and monetizing of the asset," said Mr. Garfinkle, adding that being under a major commercial firm, along with their real estate experience, should help build a client base.
The team of nine will manage, reposition and sell assets such as office, industrial, retail, hotel and multi-family buildings, condominiums and land.
Mr. Garfinkle has been an asset manager, specializing in acquisition and repositioning of distressed real estate, for 25 years. Previously, he was chief executive officer and managing member of the GWP Group, a Miami-based real estate investment and management firm now known as Biscayne Atlantic.
Under this firm, he bought under-performing office buildings in the 1990s, such as New World Tower at 100 Biscayne Blvd. and Ocean Bank building at 200 SE First St., both with occupancies below 50%.
Much-needed maintenance and repairs were done on both, Mr. Garfinkle said, and aggressive leasing programs were geared up to fill the empty offices.
The work paid off, he said, as the two buildings were sold, one in 2004 at an occupancy rate of 90% and the other in 2006 at an occupancy rate of 85%.
In many properties, Mr. Garfinkle said, years of neglect have caused tenants to move out, reducing revenues. After becoming the receiver at such a property, he said, a first step is to rebuild value for existing and future tenants.
With South Florida ground zero for distressed properties, Mr. Garfinkle said, there’s more to come for the commercial sector.
"I believe we are going to see more issues come up over next year and there’s going to be more properties where receivership services are going to be needed, so we are trying to fill a market need."
Experienced receiver Andrew Bolnick agrees on the need for receivership services locally, the reason he’s opened an office in downtown Miami to service clients throughout South Florida.
With 30 years’ experience, Mr. Bolnick’s firm, Andrew Bolnick & Associates based in Clearwater, works with commercial groups to turn around distressed properties such as office buildings, retail centers, hotels and multi-family residential buildings.
In the past three years, Mr. Bolnick said, he’s been spending more time in the tri-county area, adding that following the real estate downturn his services were needed more here.
The company is currently handling about 35 receiverships and managing $1.4 billion in assets, he said.
The group’s presence in Miami is vital, Mr. Bolnick said, because there are "large projects in South Florida still being worked on that have a strong chance of going into receivership. Bankruptcy is increasingly becoming a no-win situation because values have decreased so greatly." Advertisement