December 6, 2010
Real Estate Receivers - Which Flavor Should You Choose? By Jim Myers, Inglewood Associates, LLC TMA-Ohio December 2010 Newsletter
Many types of professionals work on real estate receiverships: brokers, auctioneers, property managers, attorneys, contractors, developers and specialized firms that might be a blend of all of these. The projects can be varied, ranging from a small, single-tenant property or block of undeveloped land, to complex partially finished developments with limited (or no) cash flow. To get the best results for the stakeholders, it is critical to match the receiver to the project.
The first step is to assess the project and identify the various roles that the receiver may have to perform:
- Does the project have cash flow to protect and enhance it, or is the receiver expected to generate cash flow through securing new tenants and/or selling the property?
- Are the property management issues complex? Is the project in good shape, in need of repair and/or stopped in mid-development? Does construction need to be completed?
- How critical are tenant relations?
- What type of management and financial reporting is required?
- Will there be a need to conduct discovery and other historical analysis of the project?
- Are the legal issues substantial and complex?
- Will a detailed strategic plan for the property be required?
Once you understand the duties and their relative overall importance, you should next evaluate the receiver options. We believe it's critical to evaluate the receiver within these guidelines:
Impartiality and independence are requirements. The primary role and background of your receiver may tell you a lot about their focus and how difficult it may be to change directions if you don't like the results. Make sure the receiver has no conflicts, not just with the various parties, but also in terms of owning, managing or brokering for competing projects.
Cost-consciousness and focus are crucial. There is always some activity that can be done, but does it make sense given the nature, complexity and expected tenure of the project?
- Strategic focus is a must. Each project deserves an operational plan, but is the plan appropriate for the project and the stakeholders' interests? Does the receiver have experience with the property class?
- Operational flexibility is important. Is the firm highly integrated or decentralized? Can the receiver embrace a flexible approach to the project, only doing what is appropriate for the situation regardless of the focus of the receiver's firm?
Our team at Inglewood Associates includes professionals with extensive and direct experience in all phases of real estate. We have analyzed, bought, sold, developed and managed a wide variety of real estate projects. We have directed and managed both large and small restructurings. We operate on a decentralized, low overhead model that ensures that our clients receive the best result, at a favorable cost.