Cordes & Company

When Do I Need to Appoint Real Estate Receiver?

Date: May 20, 2020

COVID-19 has unexpectedly brought an anticipation of increased distress in real estate markets across the U.S., with particular expected impacts on retail, office , restaurant, and multi-family properties. Default rates have already increased significantly and are projected to continue to increase for the next couple of years. As a result, we anticipate that real estate devaluation will commence in the next few months and continue until the supply-demand equilibrium is re-established.

We are receiving numerous calls from creditors to discuss at what point it makes sense to move forward with the appointment of a Receiver when a debtor becomes unresponsive and the loan goes into default.  Every situation is unique.  However, we generally see the following advantages with the appointment of a Receiver early in the cycle where declining real estate values are occurring.

  1. Asset Preservation. A Receiver can alleviate concerns about the current condition of the underlying collateral and will ensure that the collateral is being well cared for including:
    1. Curing deferred maintenance
    2. Implementing operating efficiencies to reduce operating expenses
    3. Identification of waste and fraud
    4. Protecting (and increasing) asset value pending resolution of legal action

  2. Find & Control Cash. A Receiver can capture the debtor’s cash assets related to the collateral and its holding entity.
    1. Cash assets and operating income are used to cash flow the property
    2. Review of historic uses of cash to document can identify fraudulent transfers

  3. Transparency. With a Receiver in place, there is more transparent financial reporting and operating information including:
    1. Controlling communications with major tenants and leasing prospects
    2. Forensic review of historic financial activities
    3. Accumulation of significant property documents

  4. Value Enhancement.
    1. Leasing vacancies
    2. Extending short-term lease maturities
    3. Completing unfinished construction activities
    4. Addressing maintenance or code compliance issues

  5. Expedited Liquidation. A Receiver can pursue remedies quickly when market conditions are deteriorating, including:
    1. Prepare an asset for a receivership sale or foreclosure
    2. Gather accurate financial and property information
    3. Resolve operating issues and clouds on title
    4. Investigate and remediate potential environmental issues prior to foreclosure

If you believe your circumstances may require the appointment of a Receiver and would like to discuss the nuances of your situation, please feel free to call us at 303-721-8755.

Cordes & Company is a leader in insolvency and workout advisory services across many industries, especially real estate. Roughly 75 percent of our 500+ receivership  engagements during the past 35 years have involved various real estate property types.

Cordes & Company has offices in California, Colorado and Minnesota and we are able to work on projects throughout the United States with a focus on mid-west and western states.

7979 E. Tufts Avenue
Suite 820
Denver, CO 80237
Telephone: 303.721.8755
2677 N. Innsbruck Drive
Suite A
New Brighton, MN 55112
Telephone: 612.455.0985
2030 Main Street
Suite 1300
Irvine, CA 92614
Telephone: 949.379.1202