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The major decline in real estate prices the past two years has resulted in the availability of a large number of troubled real estate development properties. Some are from developers whose projects are subject to pending foreclosure or distress sale. Others (either individually or as part of a portfolio) are from lenders who have already foreclosed or taken properties back by deed in lieu. In addition, a number of lenders holding defaulted real estate loans are seeking to sell those loans, again either individually or as part of a portfolio. Finally, portfolios of property and defaulted loans are expected to become available as a result of the recent Emergency Economic Stabilization Act. Some of the distressed real estate assets becoming available require targeted and specialized expertise, particularly those in the process of development or sales, or where there may be a need to reprogram or redevelop to extract a property’s value. For example:
• A high-rise residential condominium project under construction, or completed but with few or no unit closings, that should be converted wholly or in part to a multifamily rental property, if condominium purchasers and the existing HOA can be dealt with.
• A large-scale master-planned community with some closings but lots of future phases and front-loaded amenities with a mezzanine lender taking over the project.
• A planned business park whose development is conditioned on completion of public infrastructure improvements that are no longer economically viable, so that either the approval conditions must be modified or the project re-entitled and redeveloped for another use.
• A resort property that requires refinancing, redesign and new government entitlements.
• An urban redevelopment project that isn’t penciling with business terms requiring negotiation with the Redevelopment Agency.
Building on its Transaction, Land Use, Financing, Commercial, Residential and Resort Development expertise, HechtSolberg is uniquely qualified to provide the combination of skills required for such distressed projects. We assist clients with the following:
• Due diligence, analysis and acquisition of distressed real estate.
• Entitlement and land use approval analysis and restructuring.
• Conversion of for-sale condominium projects to rental programs.
• Restructuring and termination of residential, commercial and mixed-use development projects.
• Dealing with mechanic’s liens, stop notices and construction contract disputes.
• Analysis and resolution of California Department of Real Estate (DRE) issues in distressed projects.
• Loan workout and enforcement actions.
• Intercreditor issues between senior and mezzanine lender.
HechtSolberg is well positioned to create the team of attorneys necessary for successful acquisition, development and disposition of multiple types of distressed properties.
For more information, contact David W. Bagley, head of the Distressed Real Estate Assets Team.