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Sunday, 27 October 2013 22:00

Practicing the art of compromise in dealing with non-performing real estate assets

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Compromise has long been the vehicle for peace treaties, choosing what movie to see on date night and countless other scenarios in life.

But in dealing with struggling or non-performing real estate assets, compromise hasn’t always been the first strategy lenders look to in dealing with property owners.

Luckily, that appears to be changing among smaller local lenders, many of whom are willing to roll up their sleeves and work with borrowers to avoid foreclosure.

“Lenders are more willing to hold on to credit where they wouldn’t have done that before,” said David Distel, partner and senior managing director at O’Keefe & Associates Consulting LLC in Grand Rapids. “At the same time, we’re seeing them bring consultants in like us and try to help a company improve their profitably before they get into serious trouble.”

Lenders in the market are more proactive in terms of working with struggling property and business owners, Distel said. Previously, lenders would tell firms like Distel’s that they were ready to exit and proceed from there, but that’s changing, he said.

It’s not just underperforming real estate assets that are getting this treatment either. Manufacturing and production companies of various types are opening up to firms like O’Keefe & Associates.

“Our experience is that lenders are more willing to hold and assess while also strongly suggesting to bring someone in and help improve profitability before it’s too late,” Distel said.

Even companies that can be difficult to refinance are finding the ability to do so, he said. Companies are also locking into some pretty good rates, he added.

For those properties that were foreclosed and went into receivership, a majority are back on the tax rolls again.

“All of the properties that we had in receivership inventory were deals that were non-performing at one time,” said Dan Yeomans, president of Amicus Management Inc. “More than 90 percent of those assets have some type of bank financing today. The buyers may have paid cash for the original acquisition. Then, buyers worked through the problems to satisfy the lender requirements to finance the buildings.”

For example, one building needed a fire suppression system upgrade and the interior needed to be reconfigured for a tenant. The buyer purchased the building with cash, upgraded the fire suppression system, installed new loading docks and provided a tenant with the items it needed to sign a long-term lease.

The buyer took the property to its lender and obtained financing without much trouble, Yeomans said.

Read 1080 times Last modified on Friday, 25 October 2013 15:08

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