Back office talent key to working with FDIC

Real Estate Weekly, Nov 17, 1993 by Ronald B. Bruder

First, we re-evaluated the physical condition and configuration of the property in order to be able to quantify any request for capital to improve and rehabilitate the site. Next, leases were scrutinized to set the value of the property's short and long-term income potential based on a variety of refinancing scenarios and capital improvement programs. Last, we came up with a leasing and marketing strategy that best suited the property and its unique location.

Meanwhile, Goldome had problems of its own, and was seized by the FDIC, which then foreclosed on the 8th Street property. With the entrance of the FDIC, we had to revise our structure of the lease deals we were offering to meet their guidelines and change the reporting requirements. Although this slowed the process some, we were subsequently approved by the Federal Bankruptcy Court in Manhattan to carry out its turn-around program under the aegis of the FDIC.

For over a year, we worked with each tenant to re-negotiate leases where feasible, set up a plan to collect back rents and recover back taxes, and engaged in a series of improvements to bring the property back up to acceptable standards. Finally, we worked with some of the longer-term, larger tenants to literally re-think marketing strategies to strengthen their positions.

In all, we were able to save well over half of the existing leases through renewal, extension or re-negotiation. New leasing efforts brought occupancies up dramatically (to over 90 percent), doubling cash flow from rents (from approximately $1.1 million to almost $2 million) with capital improvements of approximately $150,000.

Notably, when the FDIC brought the property to public auction in late 1992, it sold for $19.5 million - considerably above its preturnaround value of $10-$12 million.

In hindsight, this Greenwich Village property set the tone for what was to come, as more and more properties made their way into the FDIC portfolio over the next few years. To do this kind of work, you have to be a company deep in resources. But, the rewards are significant for those who persevere.