State Bar of Michigan    Environmental Issues When Buying     Foreclosed Properties and Notes                             ...
Environmental Issues When Buying ForeclosedProperties and NotesWorkouts, Foreclosures and Bankruptcies are the ugly side t...
2. Financial Default – “The failure to promptly pay interest or principal when due. Default      occurs when a debtor is u...
Bankruptcy – Commonly viewed as a legal mechanism to erase legitimate debts and allow acorporation or person a “fresh star...
Questions and Answers Related to Foreclosed Assets and NotesWhat is an REO property? What does that term really mean to a ...
Disadvantage of receivership is it can be expensive and a lender does not ultimately control who thejudge picks to be the ...
Two recent cases regarding the transfer of an interest in real property and failure to disclose the“facility” status of th...
difficulties and whether they can be overcome. Due diligence activities must include a reviewand analysis of the following...
Environmental Due Diligence Questions    What is the current condition of the collateral?    Was environmental due dilig...
c. We also just obtained a grant for one of our clients developing a retail property to      conduct a Phase I & II ESA, B...
Issue: Property being well managed by Receiver and increasing its’ value, but has limited marketingcapabilities.Buyer Oppo...
 Understand the current market conditions, the property, its condition, and the process track the     property is followi...
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Environmental Issues When Buying Foreclosed Properties And Notes Rpls Summer Conference Presented By Nicholas G Maloof Esq 6 17 11.Secure

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Presentation to State Bar of Michigan discussing Due Diligence Activities When Buying Foreclosed Properties and Notes

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Environmental Issues When Buying Foreclosed Properties And Notes Rpls Summer Conference Presented By Nicholas G Maloof Esq 6 17 11.Secure

  1. 1. State Bar of Michigan Environmental Issues When Buying Foreclosed Properties and Notes Presented By: Nicholas G. Maloof, Esq., RPG President and General Counsel Associated Environmental Services, LLC July 20-23, 2011 Grand Traverse Resort and Spa Traverse City, Michigan Page 1 of 12 6001 North Adams Road, Suite 205 Bloomfield Hills, Michigan 48304 Tel: (248) 203-9898 Fax (248) 203-9372Environmental Services Email: ngm@associatedenvironmental.netLand Development Web: www.associatedenvironmental.netReal Estate Consulting Copyright©2011 Associated Environmental Services, LLC. All rights reserved.
  2. 2. Environmental Issues When Buying ForeclosedProperties and NotesWorkouts, Foreclosures and Bankruptcies are the ugly side to the commercial real estate industry.They happen in both good times and bad; however, their presence and impact are most distressing inthe midst of financial crisis and recession such as we have experienced the past several years.General Terms used in today’s discussion:Distressed Property – Commonly viewed as a property that is the subject of a workout, foreclosure orbankruptcy proceeding. Definitions of “distressed property” on the Web via Google Search: A. 1. Property that is in poor physical condition. 2. Property owned by an individual who is in poor financial condition. debbie.canequity.com/mortgage-resources/ B. A property which is to be sold in order to pay arrears on a mortgage. www.gibbons- realty.com/dictionary/D.html C. Property which either is in a dilapidated physical condition or is owned by an individual who is undergoing a period of economical instability. www.dreamtown.com/mortgage/mortgage- terms.html D. A mortgaged property which has been foreclosed on. www.bettisu.com/ E. Real estate that is under foreclosure or impending foreclosure because of insufficient income production or mortgage payment. www.propertyaxess.com/GlossaryofTerms.htm F. Property that is under a foreclosure order or is advertised for sale by its mortgagee. Distressed property usually fetches a price that is much below its market value. http://www.businessdictionary.com/definition/distressed-property.htmlMortgage-Backed Note (or Note) – “A type of promissory note that is associated with a particularmortgage loan. Mortgage-backed notes represent the legal promise to repay a mortgage loan. Thesenotes specify the terms of the loan, including the amount of interest and principal that must be repaid.They also obligate the borrower to make the payments.”http://www.investopedia.com/terms/m/mortgage-backed-note.aspDefault by a Borrower – Commonly viewed as the failure to perform a task or fulfill an obligation,especially failure to meet a financial obligation. Two general types of default are appropriate to ourconversation today: 1. Technical Default – “A deficiency in a loan agreement that arises not from a failure to make payments as promised, but from a failure to uphold some other aspect of the loan terms. Technical default indicates that the borrower may be in financial trouble, and can trigger an increase in a loans interest rate, foreclosure or other negative events.” http://www.investopedia.com/terms/t/technical-default.asp; and Page 2 of 12 6001 North Adams Road, Suite 205 Bloomfield Hills, Michigan 48304 Tel: (248) 203-9898 Fax (248) 203-9372 Environmental Services Email: ngm@associatedenvironmental.net Land Development Web: www.associatedenvironmental.net Real Estate Consulting Copyright©2011 Associated Environmental Services, LLC. All rights reserved.
  3. 3. 2. Financial Default – “The failure to promptly pay interest or principal when due. Default occurs when a debtor is unable to meet the legal obligation of debt repayment. Borrowers may default when they are unable to make the required payment or are unwilling to honor the debt.” http://www.investopedia.com/terms/d/default2.aspIn the event of Default by a borrower (whether financial or technical), the lender has several alternativecourses they can pursue: 1. Take no action and hope that the default remedies itself; 2. Require additional collateral and/or guarantees from the borrower; 3. Restructure the indebtedness with a longer amortization, lower interest rate, principal only payments or other loan alteration(s); 4. Temporarily suspend pursuing additional remedies against the borrower by agreeing to a forbearance. Forbearance is refraining from doing something that one has a legal right to do. In this case, it would be to not to enforce a claim(s) upon loan maturation and/or provide additional time for repayment of the loan; 5. Accept a discounted payoff of the indebtedness; 6. Foreclose on the loan and sell the collateral (real property) by taking physical possession and title and marketing the property; 7. Another alternative is to have a Receiver appointed by the courts to manage, marshal and/or sell the asset(s); or 8. Selling the Note (typically at a discount) to another party. These other parties can include another lender, an investor and, yes, sometimes the debtor itself.Items 1-5 referenced above are typically encountered in the “workout” phase of a potential foreclosureand are a joint attempt by the borrower and the lender to salvage a valuable property and avoid thedelays and expense generated in a foreclosure. If a deal can be made, it will likely benefit both partiesto the loan (lender and borrower).A workout can also preclude any potential harm that may mar a projects reputation due to a default.The risk of harm to a project from a default due to lost sales or shaken confidence may eventually leadto a foreclosure or a bankruptcy filing.An effective and successful workout requires that both parties take reasonable steps to protect thevalue of the collateral in order to maximize its ultimate worth and thereby protect the investments ofboth the borrower and the lender in the project.In the event that both parties determine that a workout is appropriate, it is imperative to act asexpeditiously as possible or there is a risk of one or both parties changing their minds or the valuefurther declining and throwing off the deal parameters. The longer it takes to get the deal closed thehigher the likelihood of losing the purchaser due to market forces, changes in value of thecollateral or both. Page 3 of 12 6001 North Adams Road, Suite 205 Bloomfield Hills, Michigan 48304 Tel: (248) 203-9898 Fax (248) 203-9372 Environmental Services Email: ngm@associatedenvironmental.net Land Development Web: www.associatedenvironmental.net Real Estate Consulting Copyright©2011 Associated Environmental Services, LLC. All rights reserved.
  4. 4. Bankruptcy – Commonly viewed as a legal mechanism to erase legitimate debts and allow acorporation or person a “fresh start.” The process assumes the corporation or person is honest and is a“victim of unique circumstances.”Definitions of “Bankruptcy” on the Web via Google Search: I. “The condition of being unable to pay debts, with liabilities greater than assets. There are two types of bankruptcy: involuntary bankruptcy, where one or more creditors bring a petition against the debtor; and voluntary bankruptcy, where the debtor files a petition claiming inability to meet his or her debts.” BNET Business Dictionary http://dictionary.bnet.com/definition/Bankruptcy.html II. “A legally declared inability or impairment of ability of an individual or organization to pay its creditors. Creditors may file a bankruptcy petition against a debtor ("involuntary bankruptcy") in an effort to recoup a portion of what they are owed or initiate a restructuring. In the majority of cases, however, bankruptcy is initiated by the debtor (a "voluntary bankruptcy" that is filed by the insolvent individual or organization). http://en.wikipedia.org/wiki/Bankruptcy III. “Legal process that is available for an individual who is overextended financially and is unable to pay his debts. The individual can file for bankruptcy in order to seek to legally eliminate some or all of his debts.” http://en.mimi.hu/business/bankruptcy.html IV. “…provides a legal method for an individual or commercial enterprise (business) to either wipe out (discharge) the debts by liquidating assets and distributing them among creditors or resolve them by developing a court-approved reorganization plan, or other plan involving the repayment of creditors over time.” http://www.statelawyers.com/Practice/Practice_Detail.cfm/PracticeTypeID:13Remember that a Bankruptcy filing may allow a borrower to discharge its obligation to repay the Note.Due Diligence – is generally defined as “1. An investigation or audit of a potential investment. Duediligence serves to confirm all material facts in regards to a sale;” and “2…the care a reasonable personshould take before entering into an agreement or a transaction with another party.” Due diligence is away of preventing unnecessary harm to either party involved in a transaction.”http://www.investopedia.com/terms/d/duediligence.aspThere are also legally required instances of due diligence that if not undertaken by a purchaser orlender, may result in status liability. An example of this type of due diligence is environmentalliability arising from a party failing to take advantage of legal “safe harbors” for existingenvironmental contamination or conditions on a real property. Page 4 of 12 6001 North Adams Road, Suite 205 Bloomfield Hills, Michigan 48304 Tel: (248) 203-9898 Fax (248) 203-9372 Environmental Services Email: ngm@associatedenvironmental.net Land Development Web: www.associatedenvironmental.net Real Estate Consulting Copyright©2011 Associated Environmental Services, LLC. All rights reserved.
  5. 5. Questions and Answers Related to Foreclosed Assets and NotesWhat is an REO property? What does that term really mean to a lender/bank? What does itmean to a potential buyer?  An REO property is any real estate that a lender/bank owns that it is not using for operation of the lender/bank;  Lenders are motivated to sell these properties, as a lender’s income is derived from collection interest on loans. These are non-income producing assets, and a drag on lender earnings;  Lender REO departments are responsible for marketing and selling these properties at the highest reasonable value to the lender.How does a Lender typically acquire title to a property?  Non-payment or technical default on a loan leading to foreclosure of the collateral;  Borrower offers to deed property to lender (deed-in-lieu of foreclosure) as part of a resolution of a troubled loan;  Lender decides to close one of its branches or other buildings.Why would a Receiver be appointed to dispose of an asset?A Receiver is used to insulate the lender from liability as well as allow the lender to usurp operationalcontrol from the borrower/operator through a court sanctioned process.A Receiver who is appointed by the court is charged with preserving value of the estate. The courtmay or may not empower the Receiver to sell the asset. If empowered to sell the asset on lender’sbehalf, the lender avoids ownership issues such as liability for environmental concerns, unpaid claims,and other responsibilities inherent in owning property.My personal experience has been that the lender typically requests the court to appoint a Receiverbased upon the Receiver’s relationship with the lender and lender’s legal counsel as well as theReceiver’s ability to manage the specific asset class and, hopefully, maintain or create new value forthe lender.Many times there are environmental or other liabilities, whether ripe or contingent, associated with aparticular property. By having a Receiver appointed through judicial process, the lender can avoiddealing with the liability directly and the risk for additional loss that may be associated with theliability.In addition when the asset is disposed, the lender avoids being placed in the chain-of-title as theReceiver directly transfers title to the purchaser, typically through a Fiduciary Deed offering limited orno warranties (Quit Claim in disguise?). Page 5 of 12 6001 North Adams Road, Suite 205 Bloomfield Hills, Michigan 48304 Tel: (248) 203-9898 Fax (248) 203-9372 Environmental Services Email: ngm@associatedenvironmental.net Land Development Web: www.associatedenvironmental.net Real Estate Consulting Copyright©2011 Associated Environmental Services, LLC. All rights reserved.
  6. 6. Disadvantage of receivership is it can be expensive and a lender does not ultimately control who thejudge picks to be the Receiver. A lender may request an individual, but the judge may decide to go adifferent direction, and the lender will be stuck with that decision.If a property becomes REO, how will that affect value?REO property is typically not well managed or maintained as asset managers are overworked, have toomany properties to manage, are inexperienced, retain the wrong firms to assist them manage andmarket the asset or a combination of any of the foregoing issues.As the property is not well managed or maintained, occupancy will typically fall and additional repairsare then deferred due to a downward spiraling of cash flow. This can create valuation issues from acash flow analysis standpoint as well as from a cost to cure the deferred maintenance. In addition,some problems can compound others (e.g., poor HVAC operation leads to roof stress or frozen pipesleading to water infiltration leading to mold growth).How can a buyer best position itself to purchase a bank asset? What are the importantfactors to consider so that the chances for success are improved?Contact real estate brokers or lenders directly, search websites, etc. Most lenders retain a propertymanager and a broker – sometimes they are the same firm.Have your financing squared away before contacting the lender – cash is king! I have seen assetsworth $2-3M based upon current cash flow sell for 1/3 the value for an all cash offer.Lenders say that a buyer should be willing to buy the property “as-is, where-is.” Expect that the lenderwill provide as little reps and warranties as possible – often none. This can be dangerous for a buyer –be very careful…the lender is looking out for its own best interests!Show your ability to close, either in terms of bank statements, letters of comfort from a lendinginstitution, etc.The lender views the deals that are quicker to close and having less in the need for due diligence andinspection periods as more attractive than offers requiring lengthy due diligence.What information can be obtained regarding the condition of the property? What duediligence will the bank allow?Buyer will be expected to do their own due diligence. Some Lenders are reluctant to share their thirdparty reports (Environmental Assessments, Property Condition Assessments, Appraisals, LandSurveys, Title Work, etc.) because of potential liability from the buyer if one of lender’s reports turnsout to be wrong. The Lender will try to protect itself by having purchaser sign a broad release of allliability should there be errors in the third party reports. Page 6 of 12 6001 North Adams Road, Suite 205 Bloomfield Hills, Michigan 48304 Tel: (248) 203-9898 Fax (248) 203-9372 Environmental Services Email: ngm@associatedenvironmental.net Land Development Web: www.associatedenvironmental.net Real Estate Consulting Copyright©2011 Associated Environmental Services, LLC. All rights reserved.
  7. 7. Two recent cases regarding the transfer of an interest in real property and failure to disclose the“facility” status of that real property are a shot across the bow for anyone purchasing, selling, leasingor financing real property. 1031 Lapeer, LLC v Rice (Mich. Ct. App. No. 290995; August 5, 2010,assigned for publication October 7, 2010) is a published case establishing a clear remedy for violationof Section 324.20116. A very short time later A. D. Transport, Inc. v Michigan Materials &Aggregates Company, Inc. (Mich. Ct. App. No. 290236, September 30, 2010, Unpublished) anunpublished case discussed the differing causes of action and remedies for failure to comply with astatutory obligation.These two court cases greatly impact a lender or any other owner of real property if they are leasing orselling contaminated property. Essentially the lender MUST disclose the fact, if it knows or hassufficient reason to know, that the property is contaminated or may be contaminated in excess ofMDEQ Generic Residential Cleanup Criteria. The remedy under the 1031 Lapeer, LLC v Ricecase for failing to disclose is that the transaction was void and damages were payable to theinjured party!What hurdles will buyers face when looking to purchase a bank owned retail or otherdevelopment? How can these hurdles be addressed?  Low occupancy  Poor management  Deferred maintenance  Possible environmental issues from dry cleaner tenants (either past or current)  Lender not likely to re-loan on asset – wants it “off their books.”Summarize the available financing options for purchasing bank owned property.Slim to none…no matter what the federal government says, large lending institutions are still notlending on investment properties in large volumes!Some Community Banks, Credit Unions and Life Insurance Companies are lending on investmentproperties, but they are scrutinizing deals closely.If owner occupied, SBA lending is occurring, but lead time is long and paperwork intensive.Some lending is coming back into the market with the CMBS market just starting to re-open. Aborrower will need, at a minimum, 60% LTV with a DSCR of 125%. Need highly qualified sponsorswith strong balance sheets and liquidity.What information can be obtained regarding the condition of the property? What duediligence will the bank allow?As part of an REO purchase, depending upon whether you are purchasing the Note or theAsset itself, you need to perform the proper due diligence in order to identify the propertys Page 7 of 12 6001 North Adams Road, Suite 205 Bloomfield Hills, Michigan 48304 Tel: (248) 203-9898 Fax (248) 203-9372 Environmental Services Email: ngm@associatedenvironmental.net Land Development Web: www.associatedenvironmental.net Real Estate Consulting Copyright©2011 Associated Environmental Services, LLC. All rights reserved.
  8. 8. difficulties and whether they can be overcome. Due diligence activities must include a reviewand analysis of the following in order to better understand the property: 1. loan documents; 2. leases, if any; 3. construction documents, if any; 4. development and construction financing documents, if any; 5. current title and available land survey; 6. environmental reports; and 7. engineering reports.Always do your own due diligence – the lender has conducted due diligence for itsown purposes that may directly conflict with your best interests!What consultants should be used for the purchase?The single most important thing is conduct thorough due diligence. Lenders sometimes don’t give alarge window, so you need to have a solid team you trust at the ready. Your team should include thefollowing skill sets (some areas of expertise may be covered by the same professional):  Legal Counsel  Valuation Specialists  Financing Specialists  Physical Due Diligence o Environmental o Property Inspection/Building Contractor o Structural/Civil o Land Surveyor  Property Manager  Title Company  Real Estate BrokerWhat types of properties are available in Michigan? How does the Michigan market differfrom other parts of the country?We have been involved in all types of properties on behalf of foreclosing lenders:  Industrial  Warehouse  Office  Medical  Retail  Multifamily  Mobile Home Parks Page 8 of 12 6001 North Adams Road, Suite 205 Bloomfield Hills, Michigan 48304 Tel: (248) 203-9898 Fax (248) 203-9372 Environmental Services Email: ngm@associatedenvironmental.net Land Development Web: www.associatedenvironmental.net Real Estate Consulting Copyright©2011 Associated Environmental Services, LLC. All rights reserved.
  9. 9. Environmental Due Diligence Questions  What is the current condition of the collateral?  Was environmental due diligence conducted when the loan was made? Was it conducted properly (was all of the research conducted or was it a “white wash”)?  Was the collateral contaminated when the loan was made? o If so, by the borrower or a prior owner/operator (historical impact)? o If the impact is historical, did the borrower conduct appropriate due diligence (Phase II ESA, BEA, 7a Due Care Plan, etc.)?  Are the current operations of a high-risk nature (gas station, dry cleaner, industrial, etc.)?  Are there any adjacent high-risk uses to the collateral that could have a direct or indirect impact?  Are there any issues that could impact the value of the collateral or require out of pocket costs by the lender if the property is foreclosed upon? o If there is impact, can the impact be used as a selling feature to attract a new developer or purchaser by positioning the property for development incentives?  Is the lender planning to take title, is a Receiver going to be appointed or is the Note being sold at a discount? o If the Note is being sold, the lender may only need a cursory investigation to evaluate the value of the underlying collateral; o If a Receiver is being appointed, it may make sense for the Receiver to conduct pre-acquisition due diligence to determine the condition of the collateral prior to or within a short period of time of being appointed Receiver; o If the lender is foreclosing and taking title, a thorough investigation should be undertaken to determine the condition of the property and whether the lender needs to prepare a Baseline Environmental Assessment (BEA) prior to taking title, possession or occupancy.  Are there any issues that could impact the value of the collateral or require out of pocket costs by the lender if the property is foreclosed upon? o If there is impact, can the impact be used as a selling feature to attract a new developer or purchaser by positioning the property for development incentives?When should the buyer bring in its professional team when looking at a distressedasset? a. As early as possible. If we are contacted early in the process, we can help them with identifying potential issues, possibly deal killers, price reduction points, and sources of grants, loans and other funding/reimbursement b. We just obtained a grant for one of our clients purchasing an industrial property to conduct a Phase II ESA, BEA and 7a Due Care Plan (worth about $23K) with no additional out of pocket cost to our client (he hired us to conduct a Phase I ESA and we prepared the application for the grant) Page 9 of 12 6001 North Adams Road, Suite 205 Bloomfield Hills, Michigan 48304 Tel: (248) 203-9898 Fax (248) 203-9372 Environmental Services Email: ngm@associatedenvironmental.net Land Development Web: www.associatedenvironmental.net Real Estate Consulting Copyright©2011 Associated Environmental Services, LLC. All rights reserved.
  10. 10. c. We also just obtained a grant for one of our clients developing a retail property to conduct a Phase I & II ESA, BEA and 7a Due Care Plan (worth about $30K) with no additional out of pocket cost to our client (he hired us to prepare the Brownfield Plan and we prepared the application for the grant at no additional cost)Why should a buyer conduct environmental due diligence and a property conditionassessment? a. Legal protection under both State of Michigan and Federal Law b. Determine the condition of the asset c. Identify issues that can be used as negotiating points d. Make sure you are not overpaying for the asset e. Why is bank selling note vs. foreclosing? Many times a receiver is appointed or the note sold to avoid known environmental issues or potential tort liability for existing conditions!Case Studies in Foreclosure, Workout and Receivership PropertiesExample #1 - Multi-family Residential Rental ComplexScenario: AES was retained by a foreclosing lender to review a previously prepared Phase IEnvironmental Site Assessment (ESA) and determine whether a Phase II ESA was necessary for pre-foreclosure due diligence purposes. AES reviewed the report and concurred with the Phase I ESArecommendation that a Phase II ESA was necessary to investigate off-site historically contaminatedadjacent sites with known releases of chlorinated solvents, petroleum hydrocarbons and heavy metalsthat may have impacted the property. AES prepared a scope of work to assess the suspected areas inorder to determine the impacted areas, if any. In addition, AES was requested to prepare a rough costestimate for further investigation and remediation of the impacted areas.From a non-environmental standpoint, AES also observed the property to be poorly managed andmaintained by the debtor in possession with water infiltration issues, low occupancy and some unitswith mold or other impacts.Issue: No effective Property Management (PM), high vacancies, needed repairs were not being madefurther de-valuing the asset.Buyer Opportunity: Provide PM services to manage asset, possible redevelopment of asset, projectmanage repairs, reposition asset, redevelop asset for LIHTC/Section 8, redevelop entire site to newuse, etc.Example #2 - Recreational PropertyScenario: AES was retained by legal counsel representing a Court Appointed Receiver, appointedat the request of a lender, to prepare a Phase I ESA for a potential sale of the collateral, a recreationalproperty. AES did not identify any RECs related to the property and recommended no further siteinvestigation. Page 10 of 12 6001 North Adams Road, Suite 205 Bloomfield Hills, Michigan 48304 Tel: (248) 203-9898 Fax (248) 203-9372 Environmental Services Email: ngm@associatedenvironmental.net Land Development Web: www.associatedenvironmental.net Real Estate Consulting Copyright©2011 Associated Environmental Services, LLC. All rights reserved.
  11. 11. Issue: Property being well managed by Receiver and increasing its’ value, but has limited marketingcapabilities.Buyer Opportunity: Purchase a well managed asset that is increasing in value at a substantialdiscount to the original debt as well as to the replacement cost for the improvements.Example #3 - Multi-tenant Industrial PropertyScenario: AES was retained by a foreclosing lender to prepare a Phase I ESA, Phase II ESA,Baseline Environmental Assessment (BEA) and 7a Due Care Plan for a multi-tenant industrialproperty as part of pre-foreclosure due diligence.From a non-environmental standpoint, AES also observed that there was no local person/entity chargedwith managing the property. The current broker was a “sign only” and not paying attention – doorsunlocked, maintenance issues, etc. All of the remaining tenants were in the dark on the situation andstill sending rent to the former owner who lost property via foreclosure. The special servicer isoverwhelmed and needs local help.Issue: No effective PM. Property is 50% occupied and maintenance was being deferred.Buyer Opportunity: PM services (collect rents, maintain and repair property), market property, likelyopportunity for leasing fairly high due to location of nearby national defense hub. Purchase asset at asubstantial discount to (1) original debt; (2) the replacement cost for the improvements; and (3) a veryhigh Cap Rate based upon the current NOI at 50% occupancy.Remember that each deal is unique and that the asset condition, type of investment being made,motives of the parties, timing and a multitude of other factors are never the same.Critical Take Away Points for the Potential Buyer of ForeclosedProperties or Notes  Understand the motives of all parties in a Workout, Foreclosure or Bankruptcy transaction;  Understand the needs of the party you are approaching for representation – if you are working for the Special Servicer their needs and motives may be different from that of a Receiver. If the debtor has filed bankruptcy, this adds another layer of complexity to the representation as well as motivations due to the Bankruptcy Trustee’s involvement to maximize recoveries in an expeditious manner;  It is imperative to have a team of trusted advisors to assist you in understanding the myriad of issues with a Workout, Foreclosure or Bankruptcy transaction. Remember each representation opportunity is unique and requires a team of advisors to identify the service opportunities for the team (just make sure to vet each member to ensure that they really know what they are talking about!). Page 11 of 12 6001 North Adams Road, Suite 205 Bloomfield Hills, Michigan 48304 Tel: (248) 203-9898 Fax (248) 203-9372 Environmental Services Email: ngm@associatedenvironmental.net Land Development Web: www.associatedenvironmental.net Real Estate Consulting Copyright©2011 Associated Environmental Services, LLC. All rights reserved.
  12. 12.  Understand the current market conditions, the property, its condition, and the process track the property is following – know that it could change at any time;  Make sure to understand the position of all parties involved in the transaction and know whom they are working for (i.e., where does their fiduciary duty lie?)  Remember, even if you are buying the Note, the underlying value of the real property directly impacts the value of the Note. If there are known or potential liabilities, they can substantially impact the value!  Also, as a Note purchaser you are stepping directly into the shoes of the lender – whys I the lender not foreclosing? Do they know something that you don’t?  Explore the options available for the property from an Economic Incentive standpoint – what about this property (its location, condition, etc.), the deal, the parties, etc. make the property unique, the deal unique, or make the property eligible or could make the property or deal eligible for incentives?For questions or to discuss a matter in confidence, please feel free to contact me at (248) 203-9898 or via email ngm@associatedenvironmental.net.Nicholas G. Maloof, RPG, Esq., is President and General Counsel of AssociatedEnvironmental Services, LLC (AES), an environmental services, land development and realestate consulting firm based in Bloomfield Hills, Michigan. Mr. Maloof is an active member ofthe State Bar of Michigan and has over thirteen years of experience as a transactional realestate and development attorney and over twenty-two years of experience in the field ofenvironmental and real estate consulting. A majority of his work is conducted with or onbehalf of attorneys, financial institutions, real estate brokers, developers, investors andproperty owners. Mr. Maloof is a licensed Real Estate Broker (Associate Broker), aRegistered Professional Geologist in the State of Tennessee and a licensed Title InsuranceResident Producer in the State of Michigan.Over the past 20 plus years, Mr. Maloof has been involved in thousands of real estatetransactions and land development projects from a site selection, due diligence, developmentincentive and development entitlement standpoint, as well as numerous Workout,Foreclosure and Bankruptcy related real estate transaction throughout Michigan.Workout, Foreclosure and Bankruptcy related transactions have included retail centers,industrial and warehouse sites, multi-family residential, mobile home parks, medical facilitiesand office buildings on behalf of CMBS servicers, CMBS special servicers, Court appointedReceivers, banks, legal counsel and purchasers. Page 12 of 12 6001 North Adams Road, Suite 205 Bloomfield Hills, Michigan 48304 Tel: (248) 203-9898 Fax (248) 203-9372 Environmental Services Email: ngm@associatedenvironmental.net Land Development Web: www.associatedenvironmental.net Real Estate Consulting Copyright©2011 Associated Environmental Services, LLC. All rights reserved.

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