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Www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Risk Management Strategies for Troubled Real Estate.

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Presentation on theme: "Www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Risk Management Strategies for Troubled Real Estate."— Presentation transcript:

1 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Risk Management Strategies for Troubled Real Estate Projects James F. Dulcich Darien S. Loiselle Shareholders Schwabe Williamson & Wyatt

2 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. The Stupid Engineer Awards* *http://onlyfunnyjokes.com

3 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. The Stupid Engineer Awards* *http://onlyfunnyjokes.com

4 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. The Stupid Engineer Awards* *http://onlyfunnyjokes.com

5 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. The Stupid Engineer Awards* *http://onlyfunnyjokes.com

6 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. The Stupid Engineer Awards* *http://onlyfunnyjokes.com

7 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. The Stupid Engineer Awards* *http://onlyfunnyjokes.com

8 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. The Stupid Engineer Awards* *http://onlyfunnyjokes.com

9 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. The Stupid Engineer Awards* *http://onlyfunnyjokes.com

10 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. The Stupid Engineer Awards* *http://onlyfunnyjokes.com

11 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Risk Management Strategies for Troubled Real Estate Projects James F. Dulcich Darien S. Loiselle Shareholders Schwabe Williamson & Wyatt

12 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Challenging Times for Lenders and Borrowers Estimated value of distressed U.S. commercial real estate –$187 billion – up 33% from November 2009

13 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Lenders Options for Recovering on Troubled Real Estate Loans Foreclosure Deed in Lieu of Foreclosure Action on the Debt Workout Agreement/Loan Restructure

14 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Foreclosure Judicial Foreclosure –It is the only foreclosure remedy available for mortgages –Advantages Allows lender to obtain deficiency judgment Provides forum for resolution of title disputes Can be used for reformation of the security instrument –Disadvantages Delays associated with litigation Mortgagor, trust deed grantor, and junior lien holders have redemption rights

15 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Non-Judicial Foreclosure –This remedy is available only for trust deeds –Advantages Avoids litigation delays No redemption rights can be exercised Generally less expensive –Disadvantages Lender has no right to a deficiency

16 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Deed in Lieu of Foreclosure –Advantages Most efficient means of recovering the collateral –Disadvantages Does not extinguish junior encumbrances

17 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Action on the Debt Workout/Loan Restructure –Lender does not assume ownership of the collateral –Borrower can be required to release claims and waive defenses –Lender can add new collateral and guarantors

18 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Due Diligence Before Acquiring Real Property Collateral Title Zoning –Communicate with planning staff –Retain land use specialist Permits and Other Entitlements –Make sure that key permits and entitlements have not expired –Communicate with borrower and local jurisdiction

19 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Due Diligence Before Acquiring Real Property Collateral Access Environmental –Obtain Phase I environmental site assessment –CERCLA exemptions may apply

20 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Risks of Third-Party Liability Environmental Condominium Projects Partially-completed Projects

21 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. What is the Problem? Litigation is expensive –That is not going to change Litigation is complex –Lawyers speak in Greek and operate in a different universe Litigation often destroys business relationships, and almost always impairs them

22 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Major Challenges for Resolving Construction Disputes A perfect storm for lawyers, not for owners –Construction disputes generally involve multiple parties –Construction disputes generally have complex responsibility issues –Construction disputes generally involve complex insurance questions, both from defense and coverage

23 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Major Challenges for Resolving Construction Disputes –Construction disputes generally require mounds of discovery through the written record by folks (lawyers) who do not understand how projects are constructed –Construction disputes often are resolved by individuals (judges and juries) who never have driven a nail with a hammer –Construction disputes are often handled by "litigators" rather than "problem solvers

24 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Where do owners/developers/contractors often go wrong with these matters Surprisingly, many do not have THEIR own counsel Many do not have the right team of experts Many simply think it is about winning and losing, rather than mitigating a business loss

25 Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. What are the creative solutions?


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