GlobeSt.com: What are the benefits of receiverships?

Wallace: In the past, when workout solutions failed, lenders would foreclose on the security for the loan and then sell the assets. However, during the foreclosure process the borrower may allow the property to significantly deteriorate — distressed borrowers may lapse on maintenance, insurance and more—diminishing the value of the asset, or alternatively divert cash from property operations. A receiver protects and preserves the property and can also protect a lender from liability related to the property, such as tenant claims, code enforcement, health, safety and environmental concerns, by keeping lender out of the chain of title.

As an agent of the court, a receiver's liability is limited to the assets of the receivership estate itself, as long as the receivership is properly conducted, and cannot be held personally liable. A receiver can also steer the eyes of vendors, franchisors, supplies and others away from the lender's pocketbook, and can bring a new perspective on management or best use for property.

GlobeSt.com: Why would a borrower consent to a receivership sale?

Wallace: The receiver can sell the property without the stigma of an REO sale and maximize value. Additionally, the appointment of a receiver can provide breathing room that leads to a settlement between the parties, allowing both entities to focus on negotiation of a new deal while knowing the collateral is being protected. The lender can be sure that collateral is protected while borrower can focus on finding new investors instead of bailing water trying to keep property from sinking. In exchange for consenting to a receivership, the borrower may also be able to extract some concessions from the lender, such as a forbearance agreement or an agreement not to enforce a personal guaranty.

GlobeSt.com: What are the challenges in a receivership sale?

Wallace: All involved parties should understand that receivership is a complex legal process and there are many intricate details and legalities involved in the process. There are several key issues for receivers. (1) Receivers must carefully coordinate with the title company. For multiple reasons, their involvement is crucial. It is important to note that title companies can be more difficult about issuing policies in certain states if borrowers aren't in approval of the sale. (2) It could be problematic if a receiver fails to provide proper notice of the motion to approve/confirm the sale to all parties with potential claims against the property, including any lien holders or creditors. (3) Receiverships need court approval, confirmation of the sale by the court may take can take longer than some parties may desire. (4) Again, receivership sales require an extensive understanding of the court system, as well as real property and contract law issues. Inexperienced receivers, lenders and prospective buyers could find themselves in a challenging position if they fail to properly understand the statutory requirements involved in selling a property through receivership.

GlobeSt.com: What are some of the receiver's responsibilities before and during the sale?

Nancy Daniels: The receiver is charged with adequately marketing the property to the widest buyer pool possible to achieve the highest sale price. This includes qualifying and engaging brokers, understanding value and likely sales price, positioning the asset for sale, selecting the buyer, negotiating the terms and managing the process – from letter of intent through close of escrow. A knowledgeable, skilled receiver can overcome borrower “retrading,” due diligence challenges and other threats to a successful close.

GlobeSt.com: Why are receivership sales on the increase?

Daniels: The ability to expedite the sale, as well as the capacity to properly maintain an asset and allow the lender to avoid the chain of title and reduce liability, are key factors in the increasing participation of receivers in the disposition process. Many people think receiver sales are complicated or don't follow traditional marketing programs. Quite the opposite is true. Receivers are empowered to market and sell properties prior to foreclosure, which can preserve the value of the property, resulting in higher recovery amounts and faster timelines. For this reason, receivership has become a popular alternative, particularly to sell properties, because it can expedite and maximize creditor recovery. More lenders now know about the benefits of receivers and receiver sales. Moreover, they recognize the value of avoiding foreclosure, chain of title issues and missing a hot sales market. A knowledgeable receiver selling an asset can bring a higher recovery with out the additional legal fees and holding time that foreclosure brings.

GlobeSt.com: How do you expect receivership sales in 2017 to compare to 2016? Daniels: I think we will continue to see a steady upswing in receiver sales, as lenders increasingly see that it is often the path to the highest recovery.

LOS ANGELES—Receivership sales are increasing in popularity, according to David Wallace and Nancy Daniels of Trigild. The duo recently sold the Encino Corporate Plaza, a nine-story, 126,275-square-foot office complex, for $35.5 million through a receivership. This was the firm was able to generate value through the receivership. To find out more about receiverships and why they are growing in popularity, we sat down with Wallace and Daniels for an exclusive interview.

GlobeSt.com: What is a receivership?

David Wallace: Receivership is an “ancillary remedy” usually tacked on to an existing legal action like a foreclosure proceeding. The court appoints its own agent to serve as an impartial third party to take possession and control of assets that are the subject of the legal action until that action is resolved. Those assets are any and all things pledged as security for the loan. The court will empower the receiver with whatever authority is needed to accomplish this goal. This frequently includes taking over all real and personal property, as well as proceeds from operation of the property and increasingly the power for the receiver to sell the property.

GlobeSt.com: What are the benefits of receiverships?

Wallace: In the past, when workout solutions failed, lenders would foreclose on the security for the loan and then sell the assets. However, during the foreclosure process the borrower may allow the property to significantly deteriorate — distressed borrowers may lapse on maintenance, insurance and more—diminishing the value of the asset, or alternatively divert cash from property operations. A receiver protects and preserves the property and can also protect a lender from liability related to the property, such as tenant claims, code enforcement, health, safety and environmental concerns, by keeping lender out of the chain of title.

As an agent of the court, a receiver's liability is limited to the assets of the receivership estate itself, as long as the receivership is properly conducted, and cannot be held personally liable. A receiver can also steer the eyes of vendors, franchisors, supplies and others away from the lender's pocketbook, and can bring a new perspective on management or best use for property.

GlobeSt.com: Why would a borrower consent to a receivership sale?

Wallace: The receiver can sell the property without the stigma of an REO sale and maximize value. Additionally, the appointment of a receiver can provide breathing room that leads to a settlement between the parties, allowing both entities to focus on negotiation of a new deal while knowing the collateral is being protected. The lender can be sure that collateral is protected while borrower can focus on finding new investors instead of bailing water trying to keep property from sinking. In exchange for consenting to a receivership, the borrower may also be able to extract some concessions from the lender, such as a forbearance agreement or an agreement not to enforce a personal guaranty.

GlobeSt.com: What are the challenges in a receivership sale?

Wallace: All involved parties should understand that receivership is a complex legal process and there are many intricate details and legalities involved in the process. There are several key issues for receivers. (1) Receivers must carefully coordinate with the title company. For multiple reasons, their involvement is crucial. It is important to note that title companies can be more difficult about issuing policies in certain states if borrowers aren't in approval of the sale. (2) It could be problematic if a receiver fails to provide proper notice of the motion to approve/confirm the sale to all parties with potential claims against the property, including any lien holders or creditors. (3) Receiverships need court approval, confirmation of the sale by the court may take can take longer than some parties may desire. (4) Again, receivership sales require an extensive understanding of the court system, as well as real property and contract law issues. Inexperienced receivers, lenders and prospective buyers could find themselves in a challenging position if they fail to properly understand the statutory requirements involved in selling a property through receivership.

GlobeSt.com: What are some of the receiver's responsibilities before and during the sale?

Nancy Daniels: The receiver is charged with adequately marketing the property to the widest buyer pool possible to achieve the highest sale price. This includes qualifying and engaging brokers, understanding value and likely sales price, positioning the asset for sale, selecting the buyer, negotiating the terms and managing the process – from letter of intent through close of escrow. A knowledgeable, skilled receiver can overcome borrower “retrading,” due diligence challenges and other threats to a successful close.

GlobeSt.com: Why are receivership sales on the increase?

Daniels: The ability to expedite the sale, as well as the capacity to properly maintain an asset and allow the lender to avoid the chain of title and reduce liability, are key factors in the increasing participation of receivers in the disposition process. Many people think receiver sales are complicated or don't follow traditional marketing programs. Quite the opposite is true. Receivers are empowered to market and sell properties prior to foreclosure, which can preserve the value of the property, resulting in higher recovery amounts and faster timelines. For this reason, receivership has become a popular alternative, particularly to sell properties, because it can expedite and maximize creditor recovery. More lenders now know about the benefits of receivers and receiver sales. Moreover, they recognize the value of avoiding foreclosure, chain of title issues and missing a hot sales market. A knowledgeable receiver selling an asset can bring a higher recovery with out the additional legal fees and holding time that foreclosure brings.

GlobeSt.com: How do you expect receivership sales in 2017 to compare to 2016? Daniels: I think we will continue to see a steady upswing in receiver sales, as lenders increasingly see that it is often the path to the highest recovery.