July 2009

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Receivers’ Catch: Foreclosures
Banks Pass Wind-Down Work to Court-Appointed Pros

Some banks are starting to bypass foreclosure on large, troubled real-estate developments and instead are throwing the properties into receivership, a move intended to reduce some of the headaches associated with taking over problem assets.

When banks foreclose on delinquent borrowers, they often plan to sell the property to new owners. But while holding the properties, banks are required to maintain them and pay all fees and taxes associated with the real estate. In some towns, banks that hold foreclosed residential property may be fined as much as $1,000 a day for code violations or even be subject to arrest.

California Real Estate Receiverships
As banks look to avoid the hassles of the foreclosures process, receivers are gaining a more-prominent role. Here, a development in Peyton, Colo., that has languished unfinished since WL Homes filed for bankruptcy.

To avoid those hassles, some banks are asking courts to appoint receivers for large projects, especially residential developments in California, Arizona, Colorado and other Western states. The aim is to have the receiver, not the bank, eventually sell the property. By keeping the bank’s name off the title of the property, the bank hopes to stay out of trouble with the law.

“The fact is we are seeing a number of banks that don’t want to get in the chain of title,” says Douglas Wilson, a receiver in San Diego. He and other receivers report that business is booming. A trade association, the California Receivers Forum, has seen its membership increase to 550 today from 300 in 2007.

Banks have long used receivers to work with properties owned by borrowers in default, but their role was typically making sure utilities stayed on and thieves and squatters stayed out. Now, some banks are expanding the role of receivers by hiring them to also ready properties for sale and to handle dispositions.

“They’re putting in receivers with much more proactive roles — not just collecting money” from tenants, Mr. Wilson says. And since receivers are officers of the court, they can get some things done more quickly, such as getting permits or hiring contractors.

The cost of hiring a receiver can be a drawback. Receivers are paid with creditor funds — sometimes at great cost. In addition to hourly rates starting around $250, receivers employ staffs of their own and may choose to hire on-site property managers or contractors to complete developments. Dozens may be needed for larger projects.

Hiring a receiver to sell a property also means that banks relinquish some control over the sale prices, although courts often work with banks to set minimum amounts. In addition, banks have more control over proceeds from a sale in a foreclosure than they do when a receiver sells them. Spokesmen for Citigroup Inc. and GMAC LLC said they don’t use receiverships often because of the expense.

But Wells Fargo & Co. and Bank of America Corp. are giving lots of new work to receivers, according to industry participants. Wells Fargo declined to make anyone available for comment, but a Bank of America spokeswoman said the bank uses receivership because it is efficient and avoids disputes among multiple creditors.

The bankruptcy of WL Homes LLC exemplifies the trend. The company, parent of John Laing Homes, was one of the West Coast’s biggest home builders during the real-estate boom. But after its Dubai-based owner, Emaar Properties PJSC, cut off funding, it filed for Chapter 11 bankruptcy-court protection in February, then Chapter 7 liquidation in June.

After the bankruptcy, Bank of America found itself with collateral comprising 31 separate assets in 19 locations across California, Arizona and Colorado from one $130 million loan. The properties ranged from raw land to partially completed developments to half-filled condominium buildings, meaning the bank would have to deal with everything from hiring contractors to wrangling with upset and cash-strapped homeowners’ associations if it foreclosed.

And by taking the title on the building, Bank of America could be liable for any construction defects for a decade in California or for any injuries on unsecured construction sites.

Rather than deal with the litany of issues, Bank of America turned to Taylor B. Grant, a veteran real-estate receiver based in Newport Beach, Calif.

“It is extremely complicated,” Mr. Grant says. But he adds: “Anything that we’ve seen, we’ve seen before.”

Since his June 10 appointment, Mr. Grant has visited the properties and hired asset managers, and is deciding how to dispose of the holdings.

Some tasks are mundane, like making sure fire alarms and security systems have power connected. Otherwise, he says, “on Friday they strip the copper, and Monday it’s a meth lab.”

He also will begin deciding whether he can get a better value from hiring contractors to finish partially completed homes or from tearing them down and selling vacant lots. After that, he will be able to sell the properties and distribute proceeds proportionally among creditors.

via WSJ.com

DWC appointed Asset Manager

by DWC Team on July 22, 2009

DWC appointed as Asset Manager for 12 story, 243,000 sf office building in Washington, D.C.

As part of its ongoing efforts to better serve a growing roster of clients on the East Coast, the national problem resolution and real estate services firm Douglas Wilson Companies today announced the opening of its Miami office and appointment of Regional Managing Director Terri Echarte.

The San Diego-based company specializing in distressed real estate and court-appointed receiverships now has six offices around the U.S., including San Francisco, Atlanta, Orlando, Las Vegas and Miami.

According to CEO Douglas P. Wilson, the new Miami office enhances the company’s ability to handle the swelling tide of residential and commercial real estate foreclosures in Florida and the southeastern region, as well as serve as a gateway to several markets in the Caribbean.

Heading up the just opened south Florida office is seasoned commercial real estate lending professional Terri Echarte, who Wilson said brings to the company an extensive banking and real estate background that will greatly benefit property owners and lenders looking to maximize asset value and execute reasonable exit strategies.

“We are extremely excited that Terri has joined our team,” said Wilson. “She brings exceptional knowledge and expertise to the team and we expect her to play a significant role in the continuing expansion of our comprehensive services to investors and institutional clients throughout North America and the Caribbean.”

Prior to joining Douglas Wilson Companies, Echarte was a managing director of the Miami office Holliday Fenoglio Fowler, where she primarily arranged debt, mezzanine, equity and joint venture financing for clients throughout the U.S.

In addition, she previously served as senior vice president with Bank of America’s origination team of Miami-Dade County, worked with I.R.E. Financial Corp. and directed acquisitions and dispositions for United Trust Fund.

“I’m thrilled to be joining the elite team at Douglas Wilson Companies especially in these historic times,” said Echarte. “There are many challenges ahead but also enormous opportunities for a company like DWC to leverage its national infrastructure and unmatched 20-year track record within the distressed real estate realm.”

A licensed real estate and mortgage broker, she’s a member of various professional organizations including Commercial Real Estate Women and the International Council of Shopping Centers.

Douglas Wilson Companies new Miami office is at 201 S. Biscayne Blvd. For further information, call 619-641-1141or visit www.douglaswilson.com.