Distressed Asset Practice

Recent Indicators Regarding Increase in Distressed Real Property in Florida

• Florida had the 9th highest state foreclosure rate in the nation in the second quarter of 2006; and the 3rd highest in the third quarter of 2006.
• Florida’s foreclosure rate is more than twice the national average.
• Among cities, Fort Lauderdale has the 2nd highest foreclosure rate and Miami has the 4th highest foreclosure rate in the national rankings.

^{As reported by RealtyTrac and cited by the Miami Daily Business Review Vol. 81, No.113, A2.}

• 25,000 condominium units under construction in Miami-Dade County (more than the total sold in the last 9 years).
• Investors hold 75% of the contracts for condominium units currently under construction.

^{As reported by Forbes Magazine and cited by the Miami Daily Business Review Vol. 81, No. 113, A2.}

• “[2007] South Florida foreclosures are running 2.5 times [2006’s] rate for the first four months of the year, according to court filings.”
• Miami had the highest foreclosure value rate in South Florida with 1,516 foreclosure cases valued at $383.8 (in millions) accounting for 12.9% of the value for all South Florida foreclosures.
• Wellington had South Florida’s second highest foreclosure value rate (5.6%) despite having the fewest number of foreclosure cases in South Florida (102 cases).

^{As reported in the Miami Daily Business Review Vol. 81, No. 237, A5 (May 17, 2007)}

• In Miami-Dade county, 8,000 new condo units will be completed in 2007 and nearly 12,000 additional units will be completed in 2008.
• New buildings that have recently opened in downtown Miami report many units up for resale:
  • Blue: 87 of the 330 units up for resale
  • One Miami: 155 of the 800 units up for resale

^{As reported in the New York Times (May 26, 2007)}

• Jacksonville had the 15th highest foreclosure rate in the first quarter of 2007 (3,856 foreclosures, 1 out of 123 households).
• Orlando had the 33rd highest foreclosure rate in the United States for the first quarter of 2007 (4,010 foreclosures, 1 out of 172 households).
• Tampa had the 27th highest foreclosure rate in the United States for the first quarter of 2007 (7,222 foreclosures, 1 out of 158 households).
• Each of the above metropolitan areas experienced a substantial increase in the rate of foreclosures for the first quarter of 2007 when compared with the foreclosure rate from the third quarter of 2006.

   ^{As reported by  RealtyTrac Inc. at www.realtytrac.com}

The following serves as an overview of the collective resources which Kluger Peretz Kaplan & Berlin brings to bear on challenging business problems and legal issues affecting senior lenders, mezzanine lenders, DIP lenders, private equity firms, hedge funds, and other parties owning or acquiring distressed real and personal property.  

For Lenders and Investors

Distressed real properties present a variety of issues to senior lenders, mezzanine lenders, and equity participants. These issues require insight and proven strategies to protect lenders and to maximize the return on their invested capital. For example:

•  Impact of borrower bankruptcy
•  Negotiating the resolution of intercreditor disputes
• Successor developer liability issues
• Assumption of property management and other rights and responsibilities

There may be an assumption of rights and responsibilities arising out of contracts held by the developer with:

• Unit purchasers
• Vendors
• Contractors
• Property managers
• Employees
• Senior/junior lenders
• Escrow agents
• Other parties dealing with the developer

Bankruptcy Filing Impact

Developers in distressed asset situations may file for or be placed under bankruptcy protection. A bankruptcy creates a variety of issues, including:

• Reorganization and liquidation strategies
• Asset and loan acquisition opportunities
• Intercreditor agreements
• Assumption and rejection of contracts and related damages
• Effects of the automatic stay on enforcement actions including against non-debtors
•  Financing and cash collateral issues

Intercreditor Disputes

A developer’s default may result in disputes between the mezzanine lender and the senior lender arising out of their intercreditor agreement. These disputes may include:

• Rights to foreclose
• Forbearance and estoppel
• Approval of property manager changes
• Contractual restrictions on mezzanine lenders imposed by intercreditor agreements
• Mezzanine lender’s use of unit deposits and other collateral of the borrower
• Loan acquisition rights

Condominium Issues

Many issues arise when a senior or mezzanine lender takes over a condominium project. These issues may include:

• Completing and/or amending filings with the Florida Division of Florida Land Sales, Condominium and Mobile Homes, and with the U.S. Department of Housing and Urban Development – Interstate Land Sale/RETPA Division
• Updating and notifying buyer of changes in condominium documentation
• Notifying tenants of impending conversion to condominium
• Marketing and sales issues

What We Do for Lenders

When representing lenders, we:

• Implement the expeditious foreclosure of collateral
• Advise regarding acquisition opportunities and strategies
• Negotiate and resolve complex issues arising from intercreditor agreements
• Identify and pursue tort and contract claims against third parties
• Assist in locating temporary, highly qualified management professionals to help manage real property projects
• Advise about rights and responsibilities in distressed asset situations

How You Benefit From Our Experience

Kluger Peretz Kaplan & Berlin has represented developers, senior lenders, mezzanine lenders, borrowers, private equity groups, hedge funds, trustees, receivers, and institutions such as the RTC and the FDIC. 

This wide-ranging experience provides us with a unique perspective that enables us to analyze and resolve the critical issues facing clients in matters related to distressed real property.

Our clients tell us that they refer matters to us for the following reasons:

• Our experience representing developers, lenders, private equity groups, and other parties dealing with distressed assets
• Our ability and resources to handle even the most complex matters
• Our business acumen
• Our acknowledged legal ability
• Our high standards of professionalism
• Our commitment to client communication
• Our commitment to achieve the best possible resolution in line with their objectives

When you work with Kluger Peretz Kaplan & Berlin you have seamless access to multi-disciplinary resources in:

•        Business and real estate transactions

•        Litigation and dispute resolution

•        Bankruptcy and creditors’ rights

•        Intellectual property law

Real Estate and Business Transactions

The real estate and business transactions practice represents clients:

• Dealing with the effects of distressed real estate
• Dealing with condominium development and conversion issues
• Buying and selling businesses, commercial real estate, and other assets
• Structuring transactions and entities
• Borrowing and lending in connection with commercial transactions

Clients involve us in every stage of their transactions, including:

• Clarifying the business purpose(s) to be accomplished by the transaction
• Proposing transaction structure and alternatives to achieve the client’s business purpose
• Evaluating the impact of tax and securities issues on the various structural alternatives

Litigation and Dispute Resolution   

In the area of distressed real property, we have experience litigating and resolving disputes related to:

• Loan agreements
• Inter-creditor agreements
• Development agreements
• Management agreements
• Real property purchase and sale agreements
• Disputes relating to developer membership interests
• Priority litigation
• Foreclosure
• Construction claims
• Partnership and broker fee disputes
• Property defect claims including assertions of mold, mildew, or other fungal growth
• Guarantees

Bankruptcy and Creditors’ Rights

The Bankruptcy and Creditors’ Rights practice represents:

• Lenders and borrowers in workouts and reorganizations
• Primary, mezzanine and DIP lenders in Chapter 11 proceedings
• Debtors, creditors' committees, equity holders, and other parties in interest in Chapter 11 proceedings
• Parties acquiring assets out of bankruptcy proceedings

We are often involved in every stage of the client’s matter including:

• Workouts
• Reorganization and restructuring
• Advising on business or asset acquisitions
• Maximizing recoveries

We have represented and advised clients on complex issues arising in cases under Chapter 11 throughout the United States. We have industry experience in cases involving:

• Real estate
• Aviation
• Health care
• Hospitality
• Manufacturing

The Team

We recognize the value of your time.

• We respect your business goals.
• We bring over 90 years of combined legal experience in real estate, business transactions, litigation, and bankruptcy issues.
• Eliot Abbott, Jon Chassen, Steve Silverman, and Michael Seese bring experience and fresh thinking that goes beyond the basics.

The Firm Behind the Team

Our lawyers and staff exemplify leadership, scholarship, teamwork, experience, creativity, and ethical responsibility.

Our firm is continually recognized as a top South Florida law firm; Kluger Peretz Kaplan & Berlin was first to be named “Best Professional Services Firm of the Year” Large Firm Category, by the South Florida Business Journal.

The firm provides clients with responsive, insightful, and supportive service to realize their business goals.

Eliot Abbott – Real Estate and Business Transactions

• Native Floridian with local knowledge and contacts
• Works all aspects of real estate transactions
• Bond financing, tax increment financing, conventional financing, participation financing
• Land acquisition and development
• Residential and commercial condominiums
• Ability to find the right idea, sometimes before his clients ever know they have an opportunity or a problem
• Co-Chair of the firm’s Real Estate and Business Transactions Practice
• Member of the firm’s management committee
• Top Dealmaker of the Year, 2006 Finalist,  Daily Business Review

Jon Chassen – Real Estate and Business Transactions

• Detailed, practical problem solver
• Clients include lenders, sellers, purchasers, developers, and landlords and tenants
• Complex real estate-related transactions and disputes
• Commercial real estate contracts, leases, and documentation of loans secured by real estate
• Condominium development and conversion
• Co-chair of the firm’s Real Estate and Business Transaction practice

Steve Silverman – Litigation and Dispute Resolution

• Complex commercial disputes and trials
• Counsel to receivers and the FDIC/RTC in large, complex failed financial institution litigation and asset recovery investigations (including those relating to real property)
• Defense of lender liability claims
• Litigation of membership interest rights
• All aspects of real property litigation
• Chair of the firm’s Litigation and Dispute Resolution Practice
• Member of firm’s management committee
• “America’s Leading Lawyers for Business,” Leaders in Florida, Litigation, Chambers USA, 2006, 2007

Michael Seese – Bankruptcy and Creditors’ Rights

• Represents borrowers, lenders (senior and mezzanine), purchasers, equity and other  parties in interest in workouts and Chapter 11 proceedings
• Complex issues under Chapter 11
•  Asset acquisition, refinancing and recapitalizations 
• Senior, mezzanine, and DIP financing

Past representations include

• large international cargo carrier, reorganizing under Chapter 11
• large U.S. steel producer’s sale of assets
• Private equity groups in acquiring hotel and retail operations 
• Equity in recapitalization and buyout in connection with residential condo developments.

Co-chair of firm’s Bankruptcy and Creditors’ Rights Practice

AV Rated by Martindale-Hubbell

Listed “America’s Leading Lawyers for Business,” Leaders in Florida, Bankruptcy, Chambers USA, 2007

Listed "Super Lawyer," Florida Super Lawyers Magazine, 2006, 2007

Listed "Legal Elite," Florida Trend Magazine, 2007

Recommended Restructuring and Insolvency, PLC Cross-Border Restructuring and Insolvency Handbook, 2007, 2008

Contact Information for Kluger Peretz Kaplan & Berlin Distressed Asset Group

Eliot Abbott      Real Estate                    eabbott@kpkb.com

Jon Chassen    Real Estate                     jchassen@kpkb.com

Steve Silverman Litigation                      ssilverman@kpkb.com

Michael Seese  Bankruptcy                   mseese@kpkb.com     

Eyal Berger      Bankruptcy/Litigation    eberger@kpkb.com

Karyl Argamasilla Real Estate               kargamasilla@kpkb.com

201 South Biscayne Boulevard, Suite 1700 Miami FL 33131 
305.379.9000