Receivers take over when project crashes
Job is to find agreement all parties can live with
Sometimes it is better to hire a receiver than it is to give up on a commercial property that's in financial straits.
That's the conclusion increasing numbers of lenders are coming to as the number of office buildings and shopping centers slipping into foreclosure continues to rise.
"It's a busy time," said Jerry McHale, a Fort Myers-based certified public accountant. "I've been doing this for 35 years and I've never been busier."
Bill Valenti, president of Florida Gulf Bank in Fort Myers, said hiring a receiver is no easy task.
"Well, luckily, I'm not in the situation where I'm looking right now," he said, but when he needs one, matching the receiver to the job at hand is crucial because it's a sensitive job that requires a lot of discretion.
"You've got to be able to search back and see what their successes have been," he said. "You want to collect as much money as you can for your shareholders but at the same time a scorched-earth approach to receivership leaves a bad taste in everybody's mouth" and may not be in the bank's long-term interest.
Bankers don't typically hire a receiver except in large, complicated situations, he said. "It's not for an everyday commercial foreclosure."
Usually, Valenti said, "The bank would hire an attorney to file the foreclosure, and probably a property manager, but a receiver, not really."
Steve Cunningham, a commercial real estate broker and appraiser, has also been in Fort Myers for 35 years but only recently geared up with Fort Myers-based LandQwest Asset Recovery to do large numbers of receiverships.
That company's sister company, LandQwest Commercial, is available to lease or sell the property if necessary and another sister company based in Ohio is in the business of buying the debt on a property that's in foreclosure.
That can be useful because sometimes a bank simply wants out of the situation and might be willing to sell for less than the face value of a note, he said.
"Generally it's the larger out-of-state lenders who will take an offer," McHale said. "Say they're owed $20 million on a $15 million property. The investor group says 'You've got a $20 million note; we'll give you $12 million for it today.'"
Typically, he said, a borrower will petition the court in a foreclosure to appoint a receiver - the lender can recommend a receiver if it wants to.
"I work for the court," McHale said. "I kid that I put on my yellow referee shirt."
Generally, Cunningham said, the lender injects cash into the commercial project to keep it in good shape and protect the lender's financial interest.
He's the receiver at Palm Pointe, a shopping center on U.S. 41 just south of Page Field in Fort Myers. Huntington Bank filed a foreclosure Aug. 14 against owner TGI Fort Myers 41 LLC, which bought the property for $22 million.
LandQwest Commercial is handling the leasing and property management on that assignment, Cunningham said.
But receivers often have to hire other experts for a particular task. Cunningham, for example, is in the process to hire a forensic accountant who has the skills to trace where the money has gone for a project.
McHale is himself a forensic accountant, but said he sometimes needs to hire a commercial real estate brokerage to handle the leasing.
"What I try and do is get the Realtor that is familiar with the type of property I have," he said - that can be a local company if the tenant likely would come from nearby, or a national broker if the space likely could be rented to a national tenant.
But a receivership comes to an immediate halt, he said, when bankruptcy is declared - because of possible conflicts of interest, the bankruptcy trustee can't appoint the same receiver who is already in place.
Valenti said there are so many factors that a receiver must deal with that the banker inevitably gives him a certain amount of discretion.
"When a large commercial comes under duress and a lot of people have their hands out," he said. "It takes a receiver to get some kind of agreement everybody can live with."