Article as seen on GlobeStreet.com

By Carrie Rossenfeld Published:

Wilson: “Make sure to the best of your ability you understand the terms of your lease and know what that means if your building is impacted.”

Lease preservation is the ideal situation for owners and tenants after a natural disaster, but understanding what your lease says and provides for is key, Douglas Wilson, CEO of Douglas Wilson Cos., tells GlobeSt.com. Hurricanes Harvey and Irma have brought certain questions to the fore: When thingsreturn to some sense of “normal,” will residents of Texas and Florida have workplaces to which to return? What happens if their building is damaged and cannot be occupied?

Acting as a fiduciary, Wilson has expertise in remediating, fixing and repositioning damaged/broken assets. His company has handled $18 billion in distressed assets nationwide, including Florida. We spoke with him about the pressures on commercial property owners, landlords and lenders after a natural disaster, the legalities of lease preservation and the covenants in a loan, as well as what happens when property owners just “hand back the keys” on a damaged building to their lender?

GlobeSt.com: What can residents of Texas and Florida look forward to regarding their workplaces when things return to some sense of normal after the hurricanes?

Wilson: At this point, it’s still early—especially with Irma. We’ve been in business a long time—30 years. San Diego is our base, but we’re a national firm, and we’ve done a lot of development, mainly the Southwest. We also step into problem situations where the lender needs to put in a court-appointed receiver after a property has been damaged and is unoccupiable. The borrower/owner may not have the capital to fix the property, so the court appoints a receiver, an agent that will focus on preserving the value of the real estate. We’ll look at environmental and lease-preservation issues, among others.
What can these tenants expect? It depends on the nature of the damage. Often, these buildings are not occupiable because the systems have gone down. In those cases, it’s really a crisis-management situation. Our intent is to go in as quickly and efficiently as we can to identify the scope of the problem. We’ll then craft a business plan to fix the situation.

For example, after the earthquake in Northridge, CA, we were brought in in such a fashion to help with a single-net-tenant asset where Mass Mutual was the lender, and the tenant had 10 years remaining on the lease. The building was damaged to the extent that it was unoccupiable. There was a clause in the lease that if that happens, the tenant has to be notified within 30 days of the owner’s ability to fix building within 180 days—if not, the tenant can get out of the lease. The tenant had a lease that was worth millions of dollars, and they didn’t want to occupy the damaged space, but the owner wanted to preserve the lease. We brought in experts to evaluate the viability of fixing the building within 180 days, and we discovered that if we worked round the clock we could do so. In accordance with the terms of the lease we were able to bring in very sophisticated contractors and consultants, to remediate the building to the point of being occupiable again. The lease was preserved, which saved the owner and lender millions of dollars.

It’s a remarkable story, and we’re finding that there will be other examples of this in Houston and Florida. We have been a court-appointed receiver in 35 states, and we are well known in that space for stepping up quickly. As a receiver, we have the judicial authority to go in and solve these problems.

GlobeSt.com: What happens if you determine that a workspace cannot be occupied even if remediation were attempted?

Wilson: If there is extensive flood damage, regrettably the lease could be null and void. But each situation is different. The fact pattern is different for each. We talk to the special servicers and lenders directly, and over the last 10 days, we’ve already been in discussions with several of these parties over certain projects that are going to happen. The reality of it is you have to do something. It’s a big problem if property within a building is damaged and the tenants don’t have insurance. The collateral damage can be extensive to items like furniture and computers, so you have to make sure that you are adequately insured.

GlobeSt.com: What happens when owners hand back the keys on a damaged building to their lender?

Wilson: Let’s say you own a 150,000-square-foot office building in Houston, and it was seriously damaged from the storm. You may have some insurance, but not enough to fix the building. Often, owners don’t have that much equity in the building to begin with, especially in Houston, which has been a softer office market lately with the oil situation. So, you have no equity, and you don’t want to be involved in it anymore, so you will contact your lender and say, “You can take it—it’s yours.” At that point, the loan is in default, and the lender has the option under the loan documents to go to court and ask the judge to appoint a receiver to the property, which gives companies like ours the authority to be an asset and construction manager—to provide all of the real estate services we provide, only under a judicial context.

GlobeSt.com: What else should our readers know about this topic?

Wilson: The biggest message here is, wherever you are, make sure to the best of your ability you understand the terms of your lease and know what that means if your building is impacted. Protect yourself with insurance for the building and personal property.

We join all Americans in sending heartfelt condolences and support to those suffering the effects of Hurricane Harvey.

With an estimated $55 billion in property damage in the Houston commercial market alone, we know that property owners, landlords, businesses, and municipalities are in crisis.

The magnitude of destruction is unprecedented. As of this moment, over 25% of all leasable space in Houston has sustained water damage. The need to preserve and restore value of these impacted assets is urgent, and epic.

In years past, Douglas Wilson Companies (DWC) has provided support during other incidents of crisis and natural disasters. We understand the economics and financial devastation — as well as personal loss — involved in these fast-moving situations.

For over 25 years, DWC has championed hundreds of complex, nationwide assignments on behalf of lenders, legal counsel, property owners and managers.

Perhaps most pertinent to those impacted by Harvey, DWC has the immediate capacity to install, oversee and manage your unique assignment. Please contact us today on how we can rehabilitate your damaged properties and restore tenants within the tightest time frames.

Whether via advisory services or receivership, DWC utilizes a team approach, drawing from a pool of professionals with a diverse wealth of experience, including: insurance claim processing, development services, construction management, financial and forensic analysis, asset management and property management.

Our industry association, CRE Finance Council (CREFC) has partnered with Team Rubicon, a nonprofit whose primary mission is providing disaster relief to those affected by natural disasters. By pairing the skills and experiences of military veterans with first responders, medical professionals, and technology solutions, Team Rubicon aims to provide the greatest service and impact possible. Let’s all get together and show the Real Estate community’s support for the victims of Hurricane Harvey.

 

REPRESENTATIVE NATURAL DISASTER PROJECTS:

COASTAL LANDSLIDE / BLUFF FAILURE

RECONSTRUCTION, AGENCY MANAGEMENT,  RESORT MANAGEMENT

Ocean Trails Golf Course – Rancho Palos Verdes, CA: 18-hole, Pete Dye-designed, championship golf course with 75 custom-home sites overlooking the Pacific Ocean.

Davenport cliffs

Douglas P. Wilson acted as consultant for secured creditor, CS First Boston, in the Ocean Trails Chapter II Bankruptcy. DWC was responsible for overseeing debtors re-construction and repair of the golf course following a major landslide. DWC first conducted a comprehensive review and prepared cash collateral budgets for construction repairs and golf operations. Its initial tasks included monitoring the debtor’s use of cash as well as conducting an in-depth forensic accounting. In managing debtor’s construction and repair of the landslide damage and other property improvements, DWC reviewed design and engineering, bidding and negotiating construction contracts, project management and scheduling. DWC also worked closely with debtor and city, state and federal agencies to ensure compliance with the conditions of various development permits. After a successful renovation and repair of the property, Ocean Trails Golf Course was sold to a world renowned real estate developer and golf course owner.

LANDSLIDE

PRESERVING LAND FOR ULTIMATE SALE

Capistrano Terrace – San Jan Capistrano, CA: 153-lot terraced mobile-home park situated on approximately 17 acres.

DCP_0003_3 IN

DWC was tasked with general management and oversight of repairs and improvements needed to preserve the asset as a result of damage caused by several mud slides. The subsidence affected several spaces on which the mobile homes are located as well as the property’s retaining walls and other amenities. DWC oversaw the completion of multiple property inspections resulting in numerous repairs and upgrades. Throughout the receivership, DWC resolved several crisis situations including a power outage caused by a faulty generator, as well as a water outage, that required special handling. Additionally, DWC worked diligently to resolve issues and maintain positive contact with residents, who were threatening legal action for various issues at the park. DWC preserved the asset and resolved resident conflicts. The property note was sold to a party affiliated with Capistrano Terrace and DWC relinquished possession of the property.

NORTHRIDGE EARTHQUAKE

PRESERVING TENANTS AND CASHFLOW

Transamerica Building- Woodland Hills, CA: 70,000 square foot, 3 story, single tenant, office building.

Subsequent to the Northridge Earthquake, experiencing significant property damage, the building owner abandoned the premises– believing it to be irreparable within the time constrains of the Damage and Destruction provisions of its lease. Separately and prior to the earthquake, the tenant, Transamerica, had vacated the building, leaving a remaining liability of approximately six years per the lease agreement. Following the appointment of the receiver, DWC oversaw the engineering, design and construction team that restored the building in less than six months, thus preserving the lease.

WILDFIRES

FUTURE FIRE MITIGATION

One Carter – Sierra Madre, CA: A 29 lot, hillside subdivision.

Wildfire

DWC oversaw the fast track completion of significant storm water run-off protection measures, following the 2008 Santa Anita fire. This included the construction of $2 million in infrastructure improvements. DWC secured approvals from the Sierra Madre City Council to modify grading and street improvement plans for this high profile and controversial project. These improvements were mandated by the City of Sierra Madre to prevent damage to neighboring properties from threatening mud slides.

Not everyone can plan for these events, if you would like to discuss a strategic remedy for any of your assets, please contact: John Morrell

September Events

by admin on September 1, 2017

American Bankruptcy Institute (ABI) – September 7-9, 2017
ABI is hosting its 25th Annual Southwest Bankruptcy Conference at the Hotel del Coronado. They will be discussing different trends in bankruptcy law and technology. Douglas Wilson and John Morrell will be attending.

Allen Matkins Real Estate – September 11, 2017
Allen Matkins is hosting their 10th Annual View from the Top economic overview in Beverly Hills, California. There will be a panel from Blackstone, Kilroy Realty Corporation, Newmark Knight Frank, Strada Investment Group, LBA Realty and Worthe Real Estate Group to discuss what to expect at the end of 2017 and in 2018. Douglas Wilson will be participating.

Urban Land Institute San Diego|Tijuana (ULI) – September 12, 2017
ULI is hosting its monthly breakfast at the University Club in downtown San Diego. The event is exploring the future of Morena Boulevard in San Diego. Douglas Wilson and Nicholas Wilson will attend.

University of San Diego (USD): Burnham Moore’s Center (BMC) for Real Estate – September 14, 2017
USD is holding the next installment of the Breakfast at the BMC lecture series: The Changing Face of Retail at the Joan B. Kroc Institute for Peach and Justice in San Diego, California. Douglas Wilson and John Morrell will be in attendance.

National Investment Council (NIC) – September 26-28, 2017
NIC is hosting its 2017 Fall Conference “Investing in Seniors Housing and Care Properties” in Chicago, Illinois. This year Former Speaker of the U.S. House of Representatives, Newt Gingrich, will be one of the keynote speakers. Michele Vives will be participating.

Summer Events

by admin on July 12, 2017

Downtown San Diego Partnership (DSDP) – July 12
DSDP is hosting their Summer Social at the Pendry Hotel in downtown San Diego. Douglas Wilson, John Morrell and Michele Vives are attending.

Urban Land Institute (ULI) – August 8
ULI is holding their monthly breakfast at the University Club in downtown San Diego. The event is exploring the design, function and trends in real estate development within San Diego’s urban core. Nicholas Wilson and Michele Vives will be in attendance.

Urban Land Institute (ULI) – August 9
ULI, through their Revitalization & Reuse Council, is conducting a tour of the Barrio Logan area. Recent developments and revitalization projects will be featured. Michele Vives is participating.

San Diego Bankruptcy Forum (SDBF) – August 16
SDBF is sponsoring a luncheon featuring “When Worlds Collide: Interplay of Bankruptcy and State Courts” in the Jury Lounge of the new United States District Courthouse in San Diego. John Morrell and Nicholas Wilson will be attending.

California Receivers Forum (CRF) – August 17
CRF is hosting a luncheon at the Buchalter, Nemer law firm in downtown Los Angeles. The topic is “Receivership Reality: the Wisdom of the Crowd.” John Morrell and Nicholas Wilson will be participating.

San Diego/Chula Vista Sister Cities/Friendship Mission to Guanajuato & Queretaro – August 23-27, 2017
Chula Vista’s Mayor Mary Salas is hosting a small group of people to visit San Diego’s Sister City – León, and Chula Vista’s Sister City – Irapuato, both located in the heart of Mexico’s “Golden Triangle.” The party will also be visiting the cities of Silao, Guanajuato, and San Miguel de Allende to discuss business opportunities in the following industries: aerospace, automotive, biotechnology, life sciences, retirement care, homebuilding, arts and crafts and food importation. Douglas Wilson will be joining Mayor Salas’ group.

June Events

June 1, 2017

Downtown San Diego Partnership (DSDP) – June 16 DSDP is hosting is 24th Annual Golf Tournament at Coronado Municipal Golf Course in Coronado, California. Douglas Wilson and Michele Vives are participating. Pacific Coast Builders Conference (PCBC) – June 27-29 PCBC is holding its Pacific Coast Builders Conference in San Diego, California. This event showcases various […]

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Spring 2017 Newsletter

May 27, 2017
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Celebrating 25 Years at DWC: Senior Managing Directors Brad Ebright and Terry Plowden

May 27, 2017

This article is featured in the Spring 2017 Newsletter. To view the full newsletter click here. From high profile ski resorts, hotels and golf courses, to tomato farms and lumberyards; from outlet malls and mega-retail centers, to condos and Class A office towers … Brad Ebright and Terry Plowden have seen it all. Scores of court-appointed […]

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BREAKING GROUND: DWC’s First Senior Living Facility Breaks Ground this Month

May 27, 2017

This article is featured in the Spring 2017 Newsletter. To view the full newsletter click here. As part of DWC’s strategic foray into the business of senior living development, DWC is thrilled to announce the breaking ground of its first assisted living and memory care project. “This kind of development feels good to me,” says Doug […]

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Welcoming Acclaimed Attorney John Morrell as President of Douglas Wilson Companies

May 27, 2017

This article is featured in the Spring 2017 Newsletter. To view the full newsletter click here. For the past 20 years, our friend and colleague, John Morrell, has led the venerable law firm, Higgs Fletcher & Mack, as its Managing Partner and Chairman. Under his leadership, San Diego’s oldest law firm, HFM, has grown to become […]

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DWC’s Single Family Home Project – Monterey Place in Chula Vista – in Final Phase

May 27, 2017

This article is featured in the Spring 2017 Newsletter. To view the full newsletter click here. Just five months after the grand opening of the 23-home Monterey Place neighborhood in Chula Vista, the project is nearly sold out. With just 5 homes to sell, this infill neighborhood represents the diversity of expertise that Douglas Wilson Companies […]

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