Management of a wide variety of assets on a national basis has been the core of the activities of the organization since its founding. Appointments have been with the objective of turnaround, liquidation or holding pending resolution of various issues. Although activities have focused on assets in California, New York, Florida, Texas and Georgia, asset management appointments will be considered in any location. We have a wide network of counsel and cooperating entities around the world. In most appointments we act as asset managers in a fiduciary capacity, but appointments in other capacities will be considered.
Asset types managed include:
- Distribution firms
- Financial institutions
- Gaming enterprises
- Holding companies
- Hotels
- Housing tracts
- Loan portfolios
- Medical facilities
- Real estate portfolios
- Shopping centers
Maximization of Asset Values in a Liquidation
Evans has managed asset liquidations in a variety of capacities including as a State Banking Liquidator, a Federal Trustee over the forfeited assets of a bank, and a Court appointed Receiver over the assets of various entities. Each liquidation has had unique characteristics and has been approached on an asset by asset basis. Each asset is analyzed on a cost benefit basis. In some appointments immediate disposition is the logical course of action, but in other appointments it has proven prudent to enhance the asset to realize a greater value for the estate. Evans and his team have overcome great challenges, while turning them into success stories. The major challenge in liquidating an estate is to accomplish the task at minimum cost within the self-imposed time deadlines, but not compromise on the optimum recoveries possible from the various assets. Evans conducts liquidations as a business enterprise under an orderly closure.
A critical analysis of the assets, evaluation of the underlying collateral, and formulation of strategies to optimize recoveries within specified time frames are keys to a successful liquidation. Some of the more interesting dispositions and recoveries relating to a bank liquidation are described below:
- A large borrower was an offshore central bank that owed about $22 million under 400 notes, with about $1.5 million in interest arrears. The payment of these loans depended on various factors including the ability of the country to obtain assistance from IMF/World Bank, annual agricultural output of the country, and the trend of the global commodity market. Another borrower from the same country was an offshore oil company that owed in excess of $15 million in principal and about $600,000 in interest arrears. The offshore bank and the oil company were linked through a tripartite agreement tying the central bank¹s deposits at the local branch of the failed bank in liquidation. From what looked to be a 50% recovery potential all principal and accrued interest, about $40 million, was recovered in less than sixteen months from the sovereign risk. The key to success was untiring negotiation at different levels for several months and the structuring of a workout which was practicable to both sides.
- Another large group relationship involved four loans aggregating to about $20 million to four independent single asset real estate corporations. These were interest-only loans at soft rates, without recourse to the unidentified sole shareholder. One loan secured by an undeveloped land parcel in Colorado was settled at appraised value of the collateral. Another loan secured by fast food outlets in remote areas in the state of North Carolina was discounted at 8.3% representing only the time value of money through its scheduled maturity in recognition of prepayment and below market interest rate. The other loans secured by undeveloped land parcels in California, and Georgia were renegotiated into short term workouts, because of depressed real estate market, but after collecting appropriate margins and revising the interest rates to market levels. These workouts were collected in full with full interest as agreed. Foreclosure of these loans would have been a disaster due to serious legal issues and value of the collateral.
- Two large project development and construction loans were made to customers of another California bank, secretly owned by the bank under liquidation. Shortly after commencement of the liquidation, the California bank was placed in receivership with the Federal Deposits Insurance Corporation. We foreclosed on one of the credits, a 9.5 million loan secured by a 240-unit apartment complex near Palm Desert, California, spent a nominal amount for repairs, operated the apartment complex for a brief period, brought it to 99% occupancy, and sold it for $9.5 million on a partially deferred payment basis. During the whole process, interest income of about $940,000 was collected. The other credit, a construction loan for building 26 homes, and for developing a 68-lot residential tract in Palm Desert, California, turned bad due to the developer¹s inability to complete the project due, in part, to the difficulty in resolving disputes with FDIC which held a second lien on the land. After recovering about $2 million in principal and interest payments, Evans foreclosed on the loan and sold the property on a partially deferred payment basis to another developer who prepaid the note before maturity. The total recovery by way of sale of the property, and by income on the note exceeded the original outstanding loan.
- A $12.5 million loan secured by a first mortgage on 92 acres of an undeveloped commercial land parcel in Miami, Florida was trouble from the loan was made. The property was appraised at $4.2 million, due to the notoriety that the land was used as an unauthorized dump. Foreclosure proceedings initiated by the bank (before Evans¹ appointment) were delayed for over two years by countersuits from the principals/guarantors, and by the holder of the second mortgage, a savings bank. After a court ordered arbitration by a Judge, and several meetings with multiple agencies, the loan was foreclosed and the Evans obtained title to the property, which was beset with serious tax liens for several millions of dollars, and serious environmental concerns. While it appeared that abandoning title to the property was prudent, as opposed to the expensive process of cleaning the property, and the clearing of the tax liens, Evans decided otherwise. He contested the tax liens, cleared encumbrances, obtained tax exemptions, remedied the environmental issues, and marketed the property for sale in strategic parcels over a period of time. This approach resulted in an ultimate recovery of about $12.3 million, and was reported as a case study by a national newspaper.
Different strategies of value enhancement were adopted for other complex assets located across the United States, for which Evans has been the liquidator The assets included:
- an outlet mini-mall
- large tracts of undeveloped land parcels, including one fraught with environmental issues including endangered species of plants and birds,
- several hotels with problems including union issues and environmental violations,
- multi-unit apartment complexes with tenancy eviction issues,
- undeveloped land parcels with zoning entitlement, and development issues,
- office buildings with possible structural questions,
- scores of residential and commercial properties,
- a thread spinning factory,
- an out-patient surgical center,
- a bingo supply company.
Disposition of each one of the assets listed above resulted in recoveries far in excess of appraised and/or market values. The strategy adopted in one was, nevertheless, different from the other even though the type of asset involved might be the same. Two such examples are given below.
- A 300-room hotel in Georgia, about 70 miles south of Atlanta was taken over in a condition which required a substantial increase in both expenses and capital improvements to achieve potential maximum value over a several year period. Alternatively, the hotel could have been liquidated at quick sale for a net of $2 million. The city officials and the local commercial community had virtually blacklisted the prior owner, and the property, which was an eyesore. The hotel franchisor decided to withdraw its flag. After initial meetings and assessments, it was concluded that a carefully designed renovation, operating and marketing plan could result in a recovery which would be three times the value of a quick sale. After resolving tax and environmental problems, including asbestos abatement, the hotel was renovated. The total investment in the property was about $5 million and the hotel¹s franchise was changed to Crowne Plaza and groomed to be a convention hotel after extensive study of the market. After operating the hotel for two years, it sold for $12 million.
- A 168-room airport hotel in New York was foreclosed after resolution of bankruptcy and other legal complications. As the offer at the foreclosure sale was about $6 million, it was decided to take title in credit bid, resolve title, unpaid taxes, zoning, environmental, and other issues, and sell it quick instead of holding. The structural deficiencies, strong unionization of the labor, and the threatened withdrawal of the franchise were first addressed. After minimum repairs were done to conform to codes, labor disputes were settled, and citations and violations were resolved, the property was sold for more than $12 million within 6 months from the time of foreclosure. Here, the preliminary evaluation dictated the strategy of an early, but, profitable disposition.
The selection of a resolution plan for an outpatient surgical center included the overlay of potentially vast liability not usually associated with orderly asset disposition. In this situation, when the center was taken over, the surgical volume had deteriorated to a level that revenue no longer covered operating costs. We determined that the surgical business could be rebuilt through the efforts of an existing non-medical manager, with a likely increase in the center¹s ultimate realizable value. Such an effort would have required a substantial investment to cover development expense and the continuing operating losses. In addition to the economic risk, the center, and ultimately the Liquidator, would bear the additional risk of liability for medical malpractice committed by the part-time surgeons referring patients. Evans concluded that the difficulty of controlling the medical risk and the more traditional financial risk combined to offset any gain derived from rebuilding the business. Consequently, we closed the surgical practice and reduced operating and holding costs substantially. Within six months we were able to sell the real property and the surgical equipment in an orderly sale at market price.
The appointment to liquidate a bingo distribution company for the benefit of its creditors required a thorough comparison of possible value enhancement to short term orderly liquidation. During the eight months before appointment, the company¹s problems caused sales to decline by 50%, a level that was less that one-third of historic volumes. After we sold the remote branch offices, the company was consolidated into a large metropolitan market holding an apparent franchise for a potentially large market share. However, after considerable evaluation of available data, and extensive discussion with employees, customers, and suppliers, we determined that there was no remaining going-concern value, and no opportunity to enhance value. In this situation, the customers had begun to order more and more bingo supplies from competitors. Additionally, as problems continued, sales representatives went to work for competitors and continued to sell to the former customers. Accordingly, Evans determined that the operations should be curtailed, allowing expenses to be greatly reduced. We then created a plan to rapidly market the remaining inventory and warehouse equipment to existing customers, competitors, and suppliers, and soon closed all facilities. We believe any effort and expense to maintain the business and try to market it would have produced a lower realization than we obtained with a short-term orderly liquidation.