Case Studies

What a Professional Receiver Can Do For You    

Complex real estate disputes often require an impartial, experienced 3rd party to intercede in order to protect and potentially improve the value of the asset. These case studies are examples of successful results where a Receivership was able to maximize the value of a property.

34 Peachtree — We served as Receivers for this 30-story, 296,000-sq. ft. Class B office tower in the Downtown Atlanta Central Business District. Upon taking control of the property, the team retained professional managers and provided the platform that allowed this CMBS Special Servicer to sell the loan. The Receiver helped facilitate the sale of the underlying note to a third party and remained in place until the foreclosure occurred.

Blackwell Square — Served as the Receiver for this shopping center in suburban Atlanta. After resolving significant deferred maintenance and environmental issues, the lender sold the note to a group who foreclosed on the center.

Singleton Square — Served as Receiver for this 130,000-sq. ft., Kroger-anchored shopping center in metropolitan Atlanta. The team extended the Kroger lease from three to 11 years and signed leases that resulted in the increase in occupancy to 85 percent. Upon the foreclosure, the lender retained the team to continue as property manager along with Retail Planning Corporation, which the team had retained initially to deal with the everyday management of the asset. The impact of the team’s actions was estimated to increase the value of the center by over $3,500,000.

Emperian — Served as receiver for this 608-unit apartment complex in Sandy Springs, GA. At the time of the receivership, there were approximately $960,000 in accounts payable, 10 lawsuits, and 15 percent of the residents were not paying rent. All of the accounts payable were resolved (at a discount) and during the receivership the occupancy consistently exceeded 90 percent. A capital improvements program was implemented that significantly increased the value of the asset. The asset was ultimately sold for more than $24 million.

Georgia Hydrolics — The team performed a forensic analysis of this manufacturing firm on behalf of a national bank. The examination uncovered significant questionable accounting entries. The bank sold the note, and we assisted the purchaser in closing down the business and selling off the assets to third parties.

Waterfall / Lake Burton Club — Acted as receiver for this 350-acre mountainside land development and golf course owned by an affiliate of the developer of the nationally-known Reynolds Plantation. The asset included two major clubhouses with restaurants, a golf course, unsold lots and acres of undeveloped land. While receiver the team maintained the property well enough that the bank was able to sell the note – delivering an operating property to the note purchaser.

Ridges at Lake Chatuse — This “resort” development in North Georgia was made up of a free standing restaurant, a 76 room unflagged hotel and a 300 slip marina. At the inception of the Receivership, the borrower had failed to pay the for his worker’s compensation insurance during the renovation of part of the marina dock area. This was immediately corrected. This is the type of situation that a Receiver frequently encounters upon appointment. This property was the third largest employer in the county. All jobs were preserved until the sale of the asset was concluded.  

12 Oaks — Acted as a substitute, managing member of this LLC. The property was a partially sold out condominium complex in a lower middle-class neighborhood. After a number of years of litigation, the lender foreclosed on the remaining unsold apartments.

Route 85 — Acted as the receiver for a 77,000-sq. ft. former Winn Dixie-anchored shopping center in metropolitan Atlanta. The lender elected to foreclose on this property.

Acted as a Receiver or Consultant for numerous operating businesses (Gas Stations, Convenience Stores, Car Washes, Child Care facilities).

In all of these examples, assets were preserved during ongoing ownership disputes.

Everyone knows of an inheritance dispute, a family business leadership conflict or other “partnership” disagreements. Often, we find that obstacles to an agreement between adult siblings are as old as playground spats. 

Here is a story of how we have recently dealt with one such dilemma:

Siblings, with a dysfunctional family history of extreme animosity, inherited a large, varied real estate portfolio. The last surviving parent had bequeathed to her children equal shares of Subchapter S entities that owned the real estate assets.

The siblings, all of whom lived more than 400 miles from the primary assets were in constant conflict over how to manage the holdings. 

In absence of an agreement, the assets deteriorated. None of the siblings were willing to deal with the significant environmental issues impacting the value of a number of the assets. Insurance was cancelled in response to the neglect. Long standing litigation languished while critical decisions were not made. Work required by state and local agencies was not performed. Tenants moved out, and as the dispute escalated, no new leases were signed.

The siblings attempted mediation but it was unsuccessful amidst the heightened emotions. One of the siblings moved the checking accounts and refused to distribute any money to the others. Finally, in exasperation, one of the siblings sued the others in an attempt to break the deadlock. By the time a Receiver was appointed, the siblings had incurred thousands of dollars in legal bills.

Soon after being appointed as the Receiver, we addressed all of the issues, aside from the fractured relationships between the siblings. During a careful analysis of each asset, we focused on taking firm control of the situation. This enabled us to ensure the continued cash distributions, which were critical to the siblings, and shift the focus from conflicts, which had damaged the assets and the family relationships to the assets which had significant value.

In the process, new insurance was placed, property repairs were completed, and numerous lawsuits were settled, producing millions of dollars for each of the shareholders. New leases were signed, thereby significantly increasing the rent roll. Had the siblings engaged us sooner, that figure could have been achieved with a great deal less stress, as well as much less litigation and expense.

Family dynamics and partnership relations are challenging when business is involved – and even more so in times of transition. Almost all will reach a conflict at one point or another that requires one or more of the services that this type of consultancy offers. If you find yourself in a similar situation, seek out the support of professionals in transition planning and conflict resolution as soon as you are able. 

Inception of the Receivership

At the time of the issuance of the Receivership Order, the Receiver was presented with  cancelled insurance policies; a failure to adhere to a Federal Court ordered environmental remediation programs; countless unpaid invoices; extensive physical problems (no parking lot lights, serious paving issues, leaking roofs, rodent infestations etc.), significant rental arrears and defaulted leases.

The Primary Property

A 28 acre well located tract of land on ground leased land occupied by a freestanding 155,000 sq.ft. credit tenant, 5 stand-alone credit tenants, a 29,000 sq.ft. “strip center” and 3.5 acres of vacant land.

The land lease had only 50 years remaining in its term and was at a very low annual payment rate. The strip center had previously been the site of a dry cleaner and was the subject of a Federally mandated environmental cleanup. The properties were owned by an LLC and had no debt. 

The Receivership Management

Upon appointment, the Receiver concluded that the primary asset’s value was severely impacted by the remaining term of the land lease and the existing use of the property. 

The Receiver approached the landowners and over the period of 18 months convinced them to sell to the ground tenants the land burdened by the ground lease in exchange for title to 2 of the credit tenant out parcels. Once this was accomplished, the Receiver was able to sell the property in separate parcels, significantly increasing the value of the holdings.

Early in the Receivership, the Receiver became aware that the primary tenant had failed to properly exercise an extension option for their very successful 155,000 sq.ft. store on which they were paying less than $1/sq.ft.

The Receiver instructed his counsel to issue a default notice based on the failure to properly exercise their rights to extend.

Suffice it to say, the lease was then renegotiated to reflect the market rate and extended which increased the value of the asset by over $16MM. This parcel was subsequently sold for $20MM.

In addition to this lease restructure, the Receiver renegotiated and extended the leases of 3 of the 5 credit tenants thereby significantly increasing the value of those out parcels.

The Receiver also concluded the ongoing remediation required to complete the necessary cleanup of the damage of caused by the former dry-cleaner. The property was eventually removed from the State Hazardous Site Index (HSI) which saved the ownership over $100,000 per year in remediation costs. 

The property had not been properly subdivided on the county tax records. In order for the parcels to be sold off individually, the subdivision had to be completed which the Receiver accomplished.

The result of all of these actions was that the Receiver was able to market the parcels separately which significantly increased their value and widened the range of potential purchasers.

Net Result

Soon after the initial Receivership Order, an offer of less than $20MM was received for the entire property and was declined.

The Receiver ultimately embarked on a marketing program in order to expose the separate parcels to the widest possible range of potential purchasers.

The sale of the major tenant parcel and three of the free-standing credit tenant parcels to two separate parties have resulted in gains of over $27.5MM. The remaining parcel is presently under contract for over $15MM.

The careful analysis and execution of the plan by the Receiver will result in a recovery of over $42MM or an increase of $22MM over the initial offer.

SHOULD YOU WISH DISCUSS YOUR SITUATION AND HOW A QUALIFIED RECEIVER CAN HELP YOU TO NAVIGATE AND MAXIMIZE YOUR POSITION, PLEASE CONTACT ME AT: hlorber@henrylorberassociates.com