(Carl Cronan is editor of Real Estate Florida.)
TAMPA, FL-Banks are willing to work with commercial real estate developers on projects before trouble arises, and bankruptcy should not be part of the equation for either side. That's the opinion of lawyers with Holland & Knight LLP, which discussed options for a down market with both groups during breakfast Thursday at the firm's local headquarters.
"Most of the banks are trying to work with people," says David Singleton, a partner in Holland & Knight's Tampa office practicing in real estate finance and asset-based lending. Banks are facing increasing pressure from federal regulators, as well as their own boards of directors, to straighten out problematic projects before they reach the need for bankruptcy protection.
Numerous commercial developments in Florida, primarily residential condominium projects, are facing foreclosures or losing entitlements because of the continued fallout from the national credit crisis. While few new projects are starting as a result, those under way are trying to find ways to continue to the next up cycle for real estate, according to Jim Shimberg, partner and local leader of Holland & Knight's real estate practice group.
While the lawyers jokingly point out that bankruptcy has become an increasingly lucrative practice for law firms lately, it should not be viewed simply as a means of buying more time to straighten out problematic developments. "It's often better to negotiate these things up front," said Noel Boeke, a partner in the Tampa office's bankruptcy practice, adding that banks don't want to have to wait for such cases to work their way through a growing backlog.
Holland & Knight's comments echo those by panelists at last week's RealShare South Florida conference in Miami, where bankers advised developers to meet with them at the first sign of trouble, rather than later. "Most of the time, it's already on our radar," remarked Peter Guilfu, senior director of North American lending with GE Real Estate in West Palm Beach.
Rod Anderson, a partner in Holland & Knight's bankruptcy practice in Tampa, observed that auctions are becoming more commonplace for selling condo units from bankrupt developments, yet they no longer attract the volume of qualified buyers needed for sufficient recovery. "There is nothing so lonely as an auction where only one bidder shows up," he said.
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