Case Studies
Case Study 1:
Patriot Bank
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Services:
Financial Services, Development Services, Construction Services, and Sales & Marketing Services
Assets:
Patriot Bank (Dallas, Texas)
Partially completed 8,500 SF custom home located in the upscale Spanish-Oaks Subdivision, a master-planned resort community in Austin, Texas
Synopsis:
The bank had a partially completed custom home (less than 50%), which was becoming a non-performing asset due to the builders inability to meet the financial obligations of the loan in place.
Challenges:
Purchase the asset from the bank at a price with the additional construction costs that could be marketed and sold to the public with a reasonable profit level, given the depressed real estate values present in the market. The original Spanish Oaks developer was also experiencing difficulties in meeting obligations to the existing homeowners due to a significant slowdown in property sales.
Solution:
After an extensive due diligence effort, a designated entity affiliated with AIM arranged financing and purchased the note from the bank with non-recourse terms. This allowed the bank to maintain a “performing asset” posture with respect to reserve requirements. Prior to purchasing the note, AIM on behalf of the designated entity performed an extensive site review of lot and house construction in place. Contractors, vendors, architect, local jurisdictions, and the homeowner association were consulted to gain a complete understanding of permits, compliance issues, and costs to complete. An extensive construction estimating process was completed to establish the new costs to complete the house. AIM in house sales & marketing was consulted to establish market comparative studies to establish market value. A financing request was prepared to the bank and the note was subsequently purchased. The exterior architecture, landscaping, and interior design was revised for maximum market appeal. Construction was commenced in order to take back to market for sale within 60 days.
Case Study 2:
Wachovia
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Services:
Sales and Marketing Services, Development Services, Construction Services, and Asset Management Services
Assets:
Wachovia “affiliate” REO Department (Central Coast, California)
The Blacklake Resort, a master-planned resort community located in Nipomo, California consisting of (80 lots on 250 acres).
Synopsis:
The bank foreclosed on all remaining subdivision properties and related “non-performing” functions. The sale of existing property had stalled due to poor land planning of the resort and market conditions present. Additionally, the original developer had failed to meet many of his obligations to the existing homeowner group such as property maintenance and the scheduled delivery of amenities.
Challenges:
There was pending litigation between the homeowner’s association and the developer for obligations not met. The future success of the property would depend on a satisfactory solution to these claims. The current land plan and product type originally designed and approved by the local jurisdiction would no longer provide positive financial results in the marketplace. A re-entitlement of the property was necessary, which would be extremely time-consuming and potentially costly to the bank or future owner of the property.
Solution:
By earning the existing homeowner’s trust, all pending litigation involving developer obligations not met were resolved. The future success of the property depended upon the existing homeowner’s support of the revised development plan. A new land plan was adopted and the balance of the sub-division was re-platted to lot sizes more in tune with the demand in the market. Utility plans were revised to the new development plan. A homebuilding enterprise was structured along with an effective sales & marketing organization. Three new model homes were constructed along with eight speculative homes. Within eighteen months the subdivision was sold out with a combination of individual home sales and bulk lot takedowns to builders (entitled and undeveloped).
Case Study 3:
Large National Bank with Concentration of Assets in the Southeast
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Services:
Property/Asset Management Services, Construction Services, Homeowner Association Administration as Declarant Representative, and Development Services (Entitlement Preservation)
Assets:
Large National Bank with concentration of assets in the Southeast (11 properties in northern Alabama)
+ Eight subdivision properties with over
675 Lots
+ One 7,000 SF retail center
+ Seven townhouse units with partially
completed construction
+ One raw land tract - plus forty acres
Synopsis:
In northern Alabama primarily in Huntsville metro, company was appointed primarily as an asset manager to provide real estate services to the bank on eleven assets. The eight subdivision properties were partially constructed, which required the infrastructure to be as-built and then valued, prior to appraisal. Additionally, there were expired entitlements, compliance issues on the properties with regulatory agencies, and financial bonds that had been called by the municipalities.
The retail center was partially completed on the exterior requiring a construction assessment to complete. There was no property management or leasing services in place to provide support to the existing tenant or to lease additional space in the building.
The townhouses had three units completed with no conditioned air and four units had been completed through the drywall stage only. There was water intrusion present on all units and garage foundations had significant cracking. Company assisted the client in the identification of engineering solutions and disposition strategies for the units.
Challenges:
All properties within this portfolio had basically been inactive for 18–24 months, until the bank foreclosed on the properties. There were significant maintenance and life safety issues with the properties given their neglect. Some of the entitlements with the City of Huntsville and the Alabama Department of Environmental Management had expired, requiring new submittals for the development. In the case of construction, finish materials were compromised due to the unconditioned space within the structure and water intrusion present within the structure due to poor drainage execution by the contractor. The disposition of assets was a major challenge due to a significant devaluation of real estate market prices.
Solution:
A detailed "Asset Action Plan" was provided to the bank after sixty days of investigative work on all properties. Entitlements were restored on each property, compliance issues with the Alabama Department of Environmental Management were resolved for each property, property maintenance was established, life safety issues present on the properties was resolved, and true value of work-in-place was established for each property. A reimbursement schedule was established between the municipalities and the bank for some of the bonds that were called as work was completed or brought into compliance. Construction services were provided to complete the retail building, while establishing property management and leasing services.
Case Study 4:
Large National Bank
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Services:
Asset Management Services, Sales and Marketing Services, Development Services (Asset Re-Positioning), and Construction Services
Assets:
Large National Bank - Sunbelt States
1400 acre master-planned resort community, located in Southwest near major population centers
Synopsis:
The prime lending bank restructured debt to the developer in 2009 giving them an extended time horizon to meet key performance measures set by the bank. One year later, little progress was made towards key performance measures with the prime lending institution and the mezzanine lender. Foreclosure action is now being considered for the property. The developer has not shown significant progress towards a turnaround plan to re-position the asset to generate sales to service the debt. There are significant entitlement issues the developer has not come to resolution on with the local jurisdictions to allow future real estate sales. Additionally, the developer has not employed an effective sales & marketing program to promote the project or addressed deficit funding issues with the property owner's association and club structure in place. A.I.M. was approached to evaluate the development for the lending institutions.
Challenges:
The real estate market conditions experienced from 2008 to the present have impacted real estate sales dramatically nationwide, especially in the destination resort business. A re-pricing of real estate product and development of new product type must be considered. Basic utilities have not been provided too much of the property thus hampering the developer’s ability to sell real estate product. The property lies in two cities and requires a cooperative effort between the development company and the two cities. There is an environment of mistrust that now exists between all parties. There are dues paying owners on the property that have stopped making quarterly payments to the associations in place as a result of the development company not meeting their obligations.
Solution:
A significant market study was employed to identify inventory in competition with the property and to establish price points for product to sell. A key factor in the property's favor was its close proximity to a major metropolitan area and a population base of 12 million people within four hours driving distance. The initial sales effort suggested was to establish an effective re-sale program to assist the local brokerage community in reducing inventory on the property. A new product type with square footage in the 1,200–1,500 range and a reduced price point more in tune to the market was suggested. A.I.M. and their affiliates had relationships with the two city governments and were able to recommend solutions to more effectively serve the property with utilities. A public relations campaign was suggested to go back to the existing ownership to re-gain their support of the community, which was paramount to the future success of the development. Finally, a greater effort was made to maintain the property right-of-ways and amenities already in place. A.I.M. has offered a staffing plan to the lending institution to takeover all operations of the resort.
Case Study 5:
West Coast Institutional Investor
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Services:
Sales and Marketing Services, Construction Services, and Asset Management Services
Assets:
A large West Coast Institutional Investor provided the financing.
The subject property was a twelve acre infill site in one of the premier Texas Resort Communities featuring mid-rise condominium product along with partially built amenities.
Synopsis:
This was a property with four condominium buildings completed with all (138) units previously sold, one building recently completed with only five of the twenty-four units sold, a partially completed marina, and no swimming pool constructed. There was additional land to build six more condominium buildings when the market demand returned. The developer in place had purchased the property in 2008 from a nationally recognized resort developer and shortly thereafter experienced the significant meltdown to the United States economy. A.I.M. was approached by the lending institution to offer an evaluation of project viability.
Challenges:
A significant number of units in the first four buildings were purchased in 2005 and 2006 by real estate investors hoping "to flip" their units for an immediate profit. The downturn in the economy caused a significant number of units to remain on the market and created competition for future developer sales. Additionally, the developer that purchased the property in 2008 had a newly completed building with only five units that they were unable to close on. Servicing the debt on the construction loan would not be possible. Resort sales of condominium product became almost non-existent nationwide due to financing constraints.
Solution:
The developer in place, since 2008 did not have the financial resources to continue the project as only time (two to three years) may create market conditions where financing and demand would return. Suggested solutions were a sale of the property at a discount to a resort operator with greater financial resources and the ability to fund the completion of the amenities. It was a necessity to finish the marina and swimming pool to assist in the marketability of the re-sale units and to establish better relations with the owners that used their units. A strong sales and marketing campaign was suggested to assist in the sale of units to the major metropolitan areas of Texas. Additionally, the expenses to the homeowner’s association were reduced, allowing current fee structure for quarterly dues to remain unchanged and to stabilize developer deficit funding requirements without compromising the appearance of the property. A new product type and unit mix was suggested for future product after polling the existing owners.
Case Study 6:
Large Sunbelt Bank
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Services:
Leasing and Marketing Services, Construction Services, and Property Management Services
Assets:
Large Sunbelt Bank with operational centers in Dallas, Texas, Birmingham, Alabama, and Atlanta, Georgia and HUD co-insured program
A Class B to B+ 225 Unit Apartment Complex (9 Buildings) located in Central Florida near major metropolitan area
Synopsis:
Five of the nine buildings were completed when the bank and HUD foreclosed on the property. Construction was substandard on the interior finishes and in the case of the final two buildings, there was significant water intrusion resulting in mold infestation of the units. Of the five buildings completed, there were 125 units available for lease and only 65 were leased at the time. A receivership of the asset by a third party was implemented.
Challenges:
There was pending litigation between the lenders and the developer for obligations not met. The lease-up of the units was handled improperly by the developer’s leadership introducing many of the units at a rental rate above market rate for the product type. A re-positioning of the lease-up was necessary. Many of the original subcontractors had filed liens against the property and these would need to be satisfied to re-mobilize the sub base to the project. A major mold remediation plan must be implemented with two of the buildings at a significant cost.
Solution:
A significant construction assessment plan was completed for all uncompleted buildings. This was the basis of a re-bidding process that was then administrated by the receiver to the subcontractor community to gain best value for the work. Market conditions had changed substantially with lower material and labor pricing. This was a necessary effort to offset the additional costs to the project to bring in an environmental remediation company to clean-up the final two buildings. The receivership negotiated fair value for the work where a lien had been filed and was successful in gaining the release of all liens in place.
The leasing of the property did not resume until two additional buildings were completed, landscape completed around seven buildings, and all amenities were completed. New pricing was established for the units more in line with market conditions with some leasing incentives offered on the first two buildings to provide greater velocity of monthly absorption. The receiver brought one of their close affiliate companies to manage the lease-up. The net operating income underwritten by the receiver after the project was 92% occupied, was exceeded. The receiver assisted the lenders in the sale of the property to a large institutional buyer (Teachers Pension Fund).
Current Projects
Residential
Rough Hollow Lakeway, Lakeway, Texas – 1,787-acre lakefront and Hill country view high-end residential development with 2,140 home sites.
Tuscan Village, Lakeway, Texas – 42 acre proposed age-restricted master planned, resort-style community with upscale Villas, Townhomes and Condominiums.
The Villas at Rough Hollow, Lakeway, Texas – 28-lot garden home neighborhood adjoining the Rough Hollow Yacht Club.
Vista Del Mar, Arroyo Grande, California - 104-acre, 54-lot high-end residential.
Water's Edge at Rough Hollow, Lakeway, Texas – High-end gated community with 100-foot lots offering lakefront and Hill Country views.
Rice Ranch*, Santa Barbra, California – 580-acre mixed single-family residential development with 725 approved homes
Woodlands Village*, Nipomo, California – Master-planned community with 1,320 single and multi-family homes, spa, three championship golf courses, retail, and office space.
*Projects being developed by principals through Western Pacific Land Group
Office / Retail /
Mixed Use
Rough Hollow Yacht Club, Lakeway, Texas – Exclusive 278-slip floating marina restaurant, ship store, fuel, swimming pool and pavilion.
Northwest Park, Houston, Texas – 336-acre residential mixed-use development.
Cove Harbor Marina & Drystack, Rockport, Texas – Marina and drystack with access to the Intercostal Canal, Aransas Bay, Redfish Bay and the Gulf of Mexico.
Georgetown Municipal Airport, Georgetown, Texas – 24,000 square-foot FBO with plans for an additional hanger on site.
Pierce Plaza, Lakeway, Texas – 11,000 square-foot medical and office complex set in the Texas Hill Country.
Completed Projects
Residential
CATP, Austin Texas – Residential and office project for non-profit organization.
Collinwood West, Austin, Texas – 45-acre single family and senior development.
Franklin Square, San Marcos, Texas – 45-acre, 165 home HUD development.
Hills of Texas, Hays County, Texas -34 custom-home development.
Meadowlark Estates, Port Neches, Texas – 170-unit mobile home park.
Meadows of Walnut Creek, Austin, Texas – 106-lot residential development.
Ranch at Cypress Creek, Cedar Park, Texas -170 –acre master planned community.
SCIP 2, Austin, Texas – 54-home development in conjunction with City of Austin.
St. John's Village, Austin, Texas – 156-unit multi-family development.
The Gardens of Decker Lake, Austin, Texas – 200-unit multi-family development.
Blacklake Fairways, Nipomo, California – 51-home golf course development.
Bradley Square, Santa Maria, California – 747-lot master-planned residential community.
Chandler Ranch, Paso Robles, California – 800-acre master-planned residential community.
Monarch Grove, Los Osos, California – 48-acre residential development.
Northgate, Westlake Village, California – 100-unit condominiums.
Oak View Apartments, Westlake Village, California – 175-unit apartments.
The Estates at Blacklake, Nipomo, California -80-home golf course development.
The Legends at Blacklake, Nipomo, California – 57-home golf course development.
Village Green, Westlake Village, California – 120-unit condominiums.
West Arms Apartments, Westlake Village, California – 200-unit apartments.
Office / Retail /
Mixed Use
210 Barton Plaza, Austin, Texas – 5-story office building on the shores of Lady Bird Lake in downtown Austin.
205 Wild Basin Office Complex, Austin, Texas – 10,000 square-foot commercial office development.
Post Oak Center North, Austin, Texas – 69,000-square-foot three-building medical and office complex.
Post Oak Center South, Austin, Texas – 58,000 square-foot, six-building medical and office complex.
Freeway Mini Storage, Beaumont, Texas – 127-unit self-storage.
Hill Country Climatized Storage, Cedar Park, Texas – 80,000 square-foot self-storage and 10,000 square-foot retail.
Hill Country Climatized Storage, Lakeway, Texas – 90,000 sq.-ft self-storage and 10,00sq. -ft. retail.
Hill Country Climatized Storage, New Braunfels, Texas – 82,000 square-foot self-storage.
Magic Car Wash & Lube, Texas and Louisiana – 8-location car wash/lube company.
St. John's Baptist Association, Austin, Texas – Commercial/office conversion project.
Threads, Port Arthur, Texas – Office development for T-shirt and embroidery company.
Vision Village, Austin, Texas – Commercial/ non –profit day care conversion project.
Cedar Valley Office Development, Westlake Village, California – 75,000 square-foot office space.