[dp]




 Distressed Commercial Real Estate
     Workouts and Opportunities
       Brecht Palombo & Bob Thomas




       ...
Brecht
Palombo:
Okay
everybody
this
is
Brecht
Palombo
with
Distressed

Pro
and
The
Bank
Prospector
and
today
I
am
very
exc...
Bob
Thomas:
Well
sure,
and
it
is
not
always
the
case
of
the
market
shiE
is

the
main
thing
that
has
happened
but
yeah,
the...
Brecht
Palombo:
Right,
so
tell
me
a
liMle
bit
about,
or
tell
us
a
liMle
bit

about
what
you
are
consulKng
on
exactly
and
s...
Bob
Thomas:
Well
and
then
so
maybe
we,
maybe
we
go
and
take
a
look
at

it,
maybe
this
is
a
really
great
property
and
it
is...
notes,
especially
notes
that
are
Ked
to
complicated
development
deals,
we

found
we
are
able
to
provide
a
clear
summary
fo...
Bob
Thomas:
Yeah,
well
in
the
case
of
residenKal
deals,
it
is
possible
to

pick
up
blocks
of
condominiums
for
example
at
v...
Brecht
Palombo:
Right,
so
lets
talk
about
the
shaking
out,
if
you,
and
I
am

going
to
ask
you
to
look
in
your
crystal
ball...
distressedpro.com
is
the
home
to
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Distressed Commercial Real Estate Workouts Opportunities Transcript

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In this podcast episode Bob Thomas, President of Turnstone Property talks with us about working on the front lines of distressed commercial real estate loans and consulting with banks with distressed loans in South Florida

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Distressed Commercial Real Estate Workouts Opportunities Transcript

  1. 1. [dp] Distressed Commercial Real Estate Workouts and Opportunities Brecht Palombo & Bob Thomas PODCAST TRANSCRIPT www.distressedpro.com 1 of 9 Wednesday, January 6, 2010 | distressedpro.com
  2. 2. Brecht
Palombo:
Okay
everybody
this
is
Brecht
Palombo
with
Distressed
 Pro
and
The
Bank
Prospector
and
today
I
am
very
excited
to
have
Bob
 Thomas
on
the
line.
Bob
has
owned
a
company
called
Turnstone
Property
 since
1997
and
he
is
very
well
know
in
the
greater
Boston
area
and
beyond
 for
doing
a
number
of
different
sorts
of
deals
in
this
area
and
we
have
him
 on
the
line
today
because
what
we
are
going
to
talk
about
it
what
he
has
 been
doing
since
we
have
seen
a
shiE
in
the
market
here
and
what
his
 company
has
been
up
to
so
the
first
thing
I
want
to
just
go
right
at
it,
what
 have
you
been
working
on
out
there
Bob? Bob
Thomas:
Hi
Brecht,
glad
to
be
here,
I
have
been
working
recently
on
 workouts
and
consulKng
relaKng
to
commercial
real
estate
loans
in
Florida
 recently. Brecht
Palombo:
Okay,
everybody
is
excited
about
working
with
the
banks
 right
now
and
I
know
banks
are,
they
are
moving
through
an
awful
lot
of
 stuff
so
I
thought
having
you
on
the
line
today
where
you
have
been
out
 there
doing
all
sorts
of
loan
consulKng
and
workout
that
you
have
been
 doing
maybe
tell
us
a
liMle
bit
about,
well
first,
what
kind
of
assets
have
 you
been
working
on
in
Florida? Bob
Thomas:
The
gamet,
everything
from
failed
subdivisions
to
industrial
 to
condo
conversions
that
did
not
work
out,
office
buildings,
the
whole
 gamet. Brecht
Palombo:
Okay,
that
is
good;
it
sort
of
gives
us
a
nice
base
to
see
 where
you
are
coming
from.
So
why
don’t
you
tell
us,
what
is
it
that
you
 see
as
sort
of
the
biggest
problem
or
the
biggest
challenge
out
there
on
 the
market
right
now? Bob
Thomas:
The
challenge
is
see
and
keeps
coming
back
over
and
over
is
 a
detachment
by
lenders
from
the
underlying
bricks
and
mortar
collateral
 and
I
think
this
is
really
at
the
root
of
the
current
situaKon.
UlKmately
the
 value
of
these
loans
comes
down
to
the
quality
and
the
characterisKcs
and
 the
performance
of
the
collateral
and
the
loans
were
oEen
made
on
faulty
 assumpKons
about
the
performance
or
the
potenKal
of
the
quality
of
the
 real
estate,
and
in
the
most
egregious
cases
loans
were
made
on
property
 which
the
lender
may
have
never
actually
physically
inspected. Brecht
Palombo:
Wow,
and
so
these
are
real
problems
you
are
seeing
out
 there
in
the
market. 2 of 9 Wednesday, January 6, 2010 | distressedpro.com
  3. 3. Bob
Thomas:
Well
sure,
and
it
is
not
always
the
case
of
the
market
shiE
is
 the
main
thing
that
has
happened
but
yeah,
there
is
a
detachment
or
there
 has
been
a
detachment
from,
by
lenders
for
the
collateral. Brecht
Palombo:
Okay,
then
tell
us
a
liMle
bit
about
your
company
has
 been
up
to
since
the
shiE
in
the
market
and
sort
of
how
you
are
addressing
 that
problem
or
that
challenge? Bob
Thomas:
Well
through
Turnstone
ProperKes
affiliate
special
assets
 advisors,
we
have
been
focusing
more
on
debt
and
asset
management
the
 recent
work
in
Miami
and
less
given
the
environment
on
development,
we
 have
a
great
team
with
experience
that
spans
back
from
the
last
situaKon
 in
the
late
80’s
and
early
90’s
and
all
the
way
through
the
current
situaKon
 and
experience
in
both
banking
and
real
estate.
In
addiKon
to
working
with
 lenders
we
have
been
talking
to
private
equity
funds
and
other
investors
 about
evaluaKng
loan
pools
and
individual
assets. Brecht
Palombo:
So
I
guess
a
liMle
bit,
you
talked
a
liMle
bit
about
who
 your
clients
are
but
why
are
banks
looking
at
outside
consultants
like
you? Bob
Thomas:
Yeah,
well
the
truth
is
many
banks
are
not
hiring
outside
 consultants
and
are
opKng
to
use
in‐house
resources
and
oEen
this
 involves
having
loan
officers
handling
workouts.
SomeKmes
their
own
or
 their
colleagues
loans
which
does
present
a
conflict. Brecht
Palombo:
What
do
you
mean
by
that? Bob
Thomas:
Well,
handling
workouts
implies
a
criKcism
of
the
loan,
so
 even
though
the
goal
is
not
to
place
blame
an
insider
might
feel
 uncomfortable
or
unable
to
say
the
tough
things
and
make
the
tough
calls
 on
a
loan
that
he
may
have
made
or
a
colleague
or
even
his
boss
may
have
 made
so
the
primary
reason
to
bring
in
an
outsider
is
that
consultants
can
 say
things
that
insiders
have
a
harder
Kme
saying. Brecht
Palombo:
Right. Bob
Thomas:
Also
of
course
the
skill
set
is
different,
underwriKng
loans,
 managing
the
relaKonship
with
the
borrower;
this
is
all
different
from
deal
 with
a
loan
that
is
broken.
So
it
requires
a
change
of
perspecKve
and
it
 requires
different
strategies. 3 of 9 Wednesday, January 6, 2010 | distressedpro.com
  4. 4. Brecht
Palombo:
Right,
so
tell
me
a
liMle
bit
about,
or
tell
us
a
liMle
bit
 about
what
you
are
consulKng
on
exactly
and
sort
of
what,
the
mechanics
 a
liMle
bit
about
what
you
have
been
doing? Bob
Thomas:
At
the
moments
we
are
doing
workouts
on
a
por]olio
of
 nonperforming
loans
as
I
said
for
a
Miami
based
bank
for
the
same
back
 we
recently
completed
an
assignment
evaluaKng
collateral
underlying
 performing
loans. Brecht
Palombo:
And
so
what
is
that,
what
does
that,
can
you
talk
a
liMle
 bit
about
what
work
consists
of
just
for
anybody
who
is
not
in
that
same
 space
that
you
are
in? Brecht
Palombo:
Sure,
sure,
well
the
reason
to
evaluate
performing
loans
 is
that
because
the
environment
has
changed
so
dramaKcally
over
the
last
 year
and
a
half,
two
years,
property
which
may
have
had
certain
potenKal,
 certain
value
may
not
any
longer
have
that
potenKal
or
value
so
the
job
 entailed
in
evaluaKon
of
the
collateral
is
to
understand,
does
the
original
 evaluaKon,
does
the
original
game
plan
for
the
property,
if
there
was
a
 project
involved
sKll
make
sense
in
the
current
environment.
And
the
goal
 there
is
to
get
ahead
of
the
curve,
for
the
bank
to
be
able
to
get
ahead
of
 the
curve
and
understand
which
loans
are
at
risk
and
to
be
proacKve
and
 working
out
soluKons
because
the
longer
problems
go
unnoKced
the
 worse
they
can
become.
 Brecht
Palombo:
So
you
might
get
a
stack,
I
am
sorry
to
interrupt
you
but
I
 just
want
to… Bob
Thomas:
No,
go
ahead. Brecht
Palombo:
want
to
make
sure
I
get
an
understanding
of
it,
so
you
 might
get
a
stack
of
currently
performing
construcKon
or
commercial
notes
 that
for
one
reason
or
another
the
lender
thinks,
gees
we
ought
to
be
 keeping
our
eye
on
this
and
then
you
will
sort
of
pour
through
the
notes
to
 get
an
understanding
of
what
the
collateral
is,
visit
the
collateral
or
the
 property
I
should
say
and
this
sort
of
thing,
is
that.. Bob
Thomas:
Exactly,
this
is,
in
the
case
of
that
assignment
it
was
taking
a
 hard
look
at
the
physical
asset
so
to
give
you
and
example,
a
borrower
 purchases
a
mulK‐family
property
with
the
intent
of
converKng
it
to
 condominiums. Brecht
Palombo:
So
who
did
not? 4 of 9 Wednesday, January 6, 2010 | distressedpro.com
  5. 5. Bob
Thomas:
Well
and
then
so
maybe
we,
maybe
we
go
and
take
a
look
at
 it,
maybe
this
is
a
really
great
property
and
it
is
really
condo
quality
and
 maybe
it
does
not
make
sense
right
now
but
maybe
the
thing
sKll
has
an
 inherent
value
and
maybe
that
might
be
a
possibility
in
the
future,
on
the
 other
hand
it
might
be
that
that
only
made
sense
in
a
very
frothy
 environment
when
a
different
type
of
asset
at
a
lower
grade
of
asset
could
 be
successfully
converted
to
condominiums
and
maybe
even
occupancy
as
 a
rental
has
not
been
so
good
and
maybe
the
property
itself
has
lost
value
 over
Kme. Brecht
Palombo:
Right,
and
that
example
that
you
give
with
the
condos,
 maybe
you
even
help
the
bank
to
avoid
making
any
further
disbursements
 on
a
project
that
is
really
never
going
to
come
to
pass
or
should
not
come
 to
pass. Bob
Thomas:
Well
there
is
a
broad
array
of
strategies
and
tools
that
can
be
 used
and
the
goal
of
course
is
to
maximize
recovery
for
the
bank
or
in
case
 of
performing
loans
to
ward
off
any
future
problems.
There
might
be
a
 need
to
rebalance
to
loan
to
value
outside
addiKonal
equity
may
be
 required,
there
may
be
a
possibility
of
restructuring
the
loan,
there
are
any
 number
of
strategies
that
can
be
employed. Brecht
Palombo:
So
that
is
performing
loans
let
us
talk
about
what
 everybody
is
talking
about
out
there
right
now
and
that
is
nonperforming
 loans
and
I
have
got
to
assume
that
you
are
seeing
stacks
of
those
right
 now,
what
is
your
strategy
there? Bob
Thomas:
Well
it
is
really,
these
tools
I
have
just
described
possibly
 looking
to
inject
more
equity
into
the
deal,
possibly
restructuring
the
debt
 in
a
way
that
allows
it
to
perform
over
the
near
term,
again
the
goal
is
 always
to
maximize
recovery
for
the
lender
and
that
may
mean
recovery
 now
or
the
potenKal
for
future
recovery. Brecht
Palombo:
Okay,
well
Bob
in
addiKon
to
the
banks,
is
there
anyone
 else
who
ought
to
be
looking
at
the
sort
of
services
that
you
are
talking
 about? Bob
Thomas:
Well
yes,
for
our
non‐lender
clients,
buyers
of
distressed
 assets
who
are
oEen
not
themselves
real
estate
professionals
we
can
 provide
real
estate
experKse.
A
reality
based
bricks
and
mortar
assessment
 of
the
collateral
that
is
underlying
the
notes.
And
on
the
other
side
for
 those
that
are
selling
notes,
banks
selling
notes,
or
other
lenders
selling
 5 of 9 Wednesday, January 6, 2010 | distressedpro.com
  6. 6. notes,
especially
notes
that
are
Ked
to
complicated
development
deals,
we
 found
we
are
able
to
provide
a
clear
summary
for
the
market
of
what
 exactly
is
being
sold,
so
that
is,
what
is
the
land,
what
are
the
permits
for,
 how
long
do
the
permits
last,
what
kind
of
construcKon
has
been
done,
 they
types
of
things
a
developer
or
an
investor
needs
to
know
in
order
to
 make
a
decision
about
that
acquisiKon. Brecht
Palombo:
Well
where
are
some
of
the
current
opportuniKes
if
we
 could
shiE
for
just
a
minute,
where
are
some
of
the
current
opportuniKes
 for
investors
would
you
say? Bob
Thomas:
Yeah,
there
are
a
lot
of
investors
out
there
wanKng
to
take
 advantage
of
the
current
situaKon
and
I
do
think
that
amidst
the
wreckage,
 there
are
some
good
opportuniKes.
Especially
in
the
hardest
hit
places
like
 south
Florida
where
clearing
prices
are
being
reached
for
distressed
assets.
 I
am
finding
many
investors
are
looking
for
the
perfect
deal.
High
return,
 low
risk
and
from
what
I
have
seen,
perfect
deals
are
very
rare,
the
market
 is
just
too
efficient
for
that
and
investors
I
think
who
are
probably
going
to
 be
successful
are
making
deals
that
may
look
risky
now,
they
have
issues,
 that
is
why
there
are
in
distress
but
in
the
future
I
think
these
deals
will,
 the
right
ones
will
seem
to
have
been
steals. Brecht
Palombo:
And
so
what
other
opportuniKes,
we
talked
about
some
 of
it
but
what
else
do
you
see
out
there
as
opportuniKes
for
investors
and
 what
type
of
person
or
what
type
of
investments
do
you
see
that
folks
 should
be
looking
to
capitalize
on
right
now? Bob
Thomas:
Yeah,
well
I
menKoned
that
I
think
there
are
very
few
perfect
 deals
and
I
think
the
opportunity
broadly
is
for
the
entrepreneurial
 investor
who
is
a
problem
solver,
who
is
willing
to
take
on
an
asset
that
has
 something
wrong,
something
that
needs
fixing
and
take
on
that
challenge. Brecht
Palombo:
And
I
presume
just
from
the
sort
of
work
that
you
are
 doing
that
you
are
kind
of
gebng
a
first
look
at
these
sorts
of
 opportuniKes? Bob
Thomas:
Yes,
yes
there
is,
I
mean
I
am
gebng
an
inside
look
at
the,
 some
specific
examples
but
one
only
need
drive
around
some
major
 American
ciKes
and
you
can
see
the
types
of
deals
that
did
not
work
out. Brecht
Palombo:
Well
is
that
not
the
truth.
Right,
now
looking
at
these
 opportuniKes,
what
are
some
of
the
pi]alls
that
you
would
say
they
should
 avoid
or
they
can
look
out
for? 6 of 9 Wednesday, January 6, 2010 | distressedpro.com
  7. 7. Bob
Thomas:
Yeah,
well
in
the
case
of
residenKal
deals,
it
is
possible
to
 pick
up
blocks
of
condominiums
for
example
at
very
low
numbers,
well
 below
replacement.
Issues
are
related
to
homeowner
associaKon
solvency
 issues,
there
may
be
a
majority
of
people
in
the
building
who
are
in
 financial
trouble
who
may
even
be
in
foreclosure
and
the
quesKon
is,
who
 is
going
to
pay
the
condo
fees
and
who
is
going
to
keep
the
lights
on
and
 there
are
also
issues
related
to
construcKonal
liability
if
you
buy
enough
 units,
the
investor
may
take
on
the
liability
of
the
original
developer.
 Overall
it
is
the
issue
of,
that
I
would
say
of
pricing
and
I
guess
that
is
true
 in
any
market.
I
think
pricing
is
Kght
and
will
be
Kght
because
there
is
 enough
money
out
there
looking
to
get
involved.
So
the
challenge
is
 pricing
the
asset
relaKve
to
a
holding
period
that
might
be
required
and
on
 incomplete
projects,
I
think
there
is
a
good
opportunity
in
incomplete
 projects
because
many
people
who
do
not
want
to
take
on
that
risk
but
 the
challenge
there
is
gebng
the
project
at
a
price
where
it
can
be
 completed
at
a
value
that
makes
sense
relaKve
to
new
construcKon
that
is
 being
sold
at
substanKal
discounts. Brecht
Palombo:
Right,
so
what
would
you
say
if
you
are
just
going
to,
if
 you
had
a
barometer
out
there,
what
is
your
feeling
on
just
sort
of
the
 state
of
the
market
today? Bob
Thomas:
Yeah,
well
what
I
would
say
is
probably
not
anything
new,
 this
has
all
been
reported
and
speculated
about
in
the
papers
but
the
 residenKal
market
seems
to
be
on
its
way
at
least
to
working
out
its
 problems
whereas
the
commercial
market
seems
to
be
just
at
the
 beginning
of
the
process. Brecht
Palombo:
Sure. Bob
Thomas:
We
have
heard
this
before
that
the
property
downtown,
 suburban
property
elsewhere
bought
at
low
cap
rates,
very
low
cap
rates,
 highly
leveraged
now
seeing
declining
occupancy
in
rents
resulKng
in
a
 drop
in
value,
equity
is
wiped
out,
in
some
cases
mezzanine
financing
 wiped
out.
These
fundamental
problems
have
generally
not
yet
been
 worked
out
as
banks
have
been
able
to
extend
maturity
dates
and
have
 been
able
to
ignore
loan
to
value
covenants
so
the
result
is
a
growing
 number
of
owners
who
are
hanging
on
to
their
property
but
no
longer
 have
equity
in
it
and
this
will
eventually
shake
out
but
the
situaKon
of
 course
varies
geographically,
this
said
in
south
Florida
I
think
they
are
 probably
a
liMle
further
on
in
working
out
the
issues
because
the
situaKon
 there
is
just
so
much
worse. 7 of 9 Wednesday, January 6, 2010 | distressedpro.com
  8. 8. Brecht
Palombo:
Right,
so
lets
talk
about
the
shaking
out,
if
you,
and
I
am
 going
to
ask
you
to
look
in
your
crystal
ball
there
and
maybe
if
you
could
 tell
us
what
you
see
out
there
and
what
kind
of
Kmeline
maybe
12
or
18
or
 24
month,
what
does
the
future
hold
from
your
perspecKve? Bob
Thomas:
Well,
there
has
to
be
the
shakeout
of
commercial
real
estate
 and
that
is
probably
given
maturity
dates
we
know
are
out
there
in
2010,
 11,
and
12
that
is
probably
when
that
begins
to
happen
and
I
do
think
 there
will
be
conKnued
opportuniKes
in
other
areas,
residenKal,
hospitality
 although
I
think
the
compeKKon
for
these
assets
will
grow
over
Kme. Brecht
Palombo:
Okay,
well
that
is
awesome
Bob,
I
want
to
thank
you
for
 coming
on
the
call
today
and
for
talking
through
all
the
stuff
for
me
and
I
 know
there
is
a
lot
of
people
who
are
visiKng
the
site
who
are
engaged
in
 their
own
shiE
and
sort
of
trying
to
get
their
arms
around
how
to
tackle
 the
new
environment
that
we
are
in.
I
do
not
know
if
there
is
anything
that
 you
would
have
that
you
would
say
to
those
folks? Bob
Thomas:
Well
thank
you
for
the
interview
and
I
want
to
congratulate
 you
on
your
terrific
new
website,
it
is
very
good
at
laying
out
which
banks
 are
dealing
with
what
troubled
assets
and
you
are
able
to,
there,
get
a
lot
 of
informaKon
that
is
otherwise
not
found
in
one
place
so
nice
job
on
that. Brecht
Palombo:
Okay,
well
I
appreciate
that
Bob
and
that
is
it,
that
is
the
 end
of
our
call
and
I
thank
you
so
much
for
being
on
here
today
and
I
know
 you
and
I
will
see
each
other
out
there
in
the
market
as
we
are
bouncing
 around
in
some
of
these
deals
but
it
was
awesome
having
you
on. Bob
Thomas:
All
right
Brecht
thanks
a
lot,
see
you
then. Brecht
Palombo:
Thanks
a
lot
Bob. 8 of 9 Wednesday, January 6, 2010 | distressedpro.com
  9. 9. distressedpro.com
is
the
home
to
BankProspector BankProspector is an online database of the REO and distressed mortgage details for more than 8,000 banks nation wide. Members use it to find bank contacts, bank owned property and distressed loan opportunities. 9 of 9 Wednesday, January 6, 2010 | distressedpro.com

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