Redeveloping Distressed Properties: Looking Forward to the Post-Crisis Era

There is no shortage of headlines related to the fallout the mortgage and financial crises have had on real estate development throughout most of the United States. As the relevant markets seek stability, it is time to look forward to managing developments into the emerging post-crisis era. What do we know and what have we learned in the wake of the burst of the so-called “real estate bubble”?

In this session, we explored the issues that real estate developers may confront as they redevelop distressed properties. Using a hypothetical multiphase development project as a backdrop, Foley Partners Martin Bishop, Daniel Bachrach, and William Guthrie, with Al Ten Broek of the Mariner Group, covered a variety of topics addressing development changes and the lessons learned from the rise of owner litigation that has come out of the financial crisis.

Topics included:

Zoning and density approvals
Vetting sales incentive programs
Reviewing existing project documents encumbering property
Distinguishing roles of different corporate entities (and their employees) during sales and post-sales processes
Budget and business plan analysis
Clarifying relationships between developer, lender, and appraiser
Pay down of existing bank loans (restructuring partial releases)
Avoiding the sale of “securities”
Existing developer liabilities (guarantees and subsidies of association budget and warranties)
Insulating sales practices against future fraud claims
Fraudulent association budgets and misrepresentations
Developing enforceable contractual provisions, particularly in workouts during a market decline
The wisdom of assuming declarant’s rights (and potential liabilities)