Firm finds growth in down market

Real Estate Weekly, Jan 6, 1993 by Therese Fitzgerald

Expanding portfolios of bank-owned real estate have created an active market for the service companies that can help institutions manage and eventually sell these properties.

GFC Capital Resources Group is one of these firms that, in a time of overall contraction, is expanding the scope of its services and its staff, in part, to respond to this phenomenon.

"In the 80's, we made money in real estate," said Gross. "In the 90's, we'll be making money from the banks. The banks have come to the realization they are not in the business of owning real estate and they should not be owning real estate."

GFC Capital Resources is actually a new parent company that will bring under one umbrella the management, mortgage brokerage and banking, and sales subsidiaries of what was formerly Gelt Funding. They are also adding some new subsidiaries like: GFC Business Credit Services, which will provide $500,000 to $5 million lines of credit and accounts receivable lending.

In all, GFC's companies today employ some 300 people compared to roughly 70 to 80 people a year and a half ago. According to Gross, they are recruiting sales and mortgage brokers and managers who were formerly with some of the top area real estate firms, like Bear Stearns, Sonnenblick Goldman and Loeb Partners. GFC has been joined by, among others, Mike Adler, a former executive vice president of Pearce Mayer Greer and most recently with Arthur Andersen. He will serve as executive vice president and contribute his experience in sales and mortgage and mortgage brokerage.

To accommodate its growth, GFC, currently based in Boro Park, Brooklyn, will be bringing its six offices -- two in Brooklyn, Mount Laurel, New Jersey, and Connecticut, Rockland, and Little Neck - under one roof in 40,000 recently leased square feet at 50 Broadway.

"We're taking our key executives and bringing them to the city," he said. "The time is right and we're attracting a great staff."

According to Gross, the firm may provide management services during the foreclosure process and after the property has been taken back by the bank. They find buyers for the properties and help find financing for the new purchaser so they can bring the institution a cash buyer. They can then offer their management services to the new buyer.

"People who want to buy today," Gross said, "you have to be able to help them get financing."

GFC is involved in commercial and multi-family properties and shopping centers, ranging anywhere from $300,000 to $25 million.

"Size is not an issue to us," he said. "It's finding the right buyer for the right piece."

Since entering the "workout and REO mode", as Gross calls it, they have sold more than 30 multi-family properties for Freddie Mac in Brooklyn, Manhattan, and The Bronx. The sales prices ranged from $300,000 and $2.5 million and they were all cash purchases.

For Freddie Mac, in Bay Ridge, Brooklyn, they helped find a "white knight" to take over a co-op's unsold shares.

For Marine Midland, they sold a multi-family building to the underlying co-op shareholders and obtained for them a bank mortgage. They have sold an empty building and a shopping center. Also, for Marine Midland, took over the Farrington Arms, an incomplete 32-unit co-op in Flushing. GFC and its subsidiaries finished the project and, within a year, sold 26 of 32 units co-op.

They have also "moved into" a condominium in Hackensack, New Jersey, where they will manage, sell and arrange the end loans.

"There's a lot of ability that three of our companies come into play on the same deal," he said.

GFC draws on extensive experience in the operation of multi-family housing. In 1986, they purchased Vanderveer Estates, a 2,503-unit complex comprised of 59 buildings on 17 acres in the Flatbush section of Brooklyn.

When the company, then Gelt, assumed management at Vanderveer, Gross said, the complex was in complete devastation. In addition to being drug-ridden, there were 400 vacant apartments and tenants were moving out at a rate of 30 to 40 per day.

Via renovation and incentive programs, Gross said, they have increased collections by 50 percent and they have virtually stopped the exodus of tenants. Through added security and awareness programs, he said, they have also tackled the drug problem.

"Are we 100 percent drug-free? The answer is no. I don't think anyone can say that. Have we made a dent in it? Yes.

Vanderveer Estates also now boasts a day camp and they offer homework sessions and adult education programs in conjunction with Medgar Evers College.

Gross said he believes it "is easier" running projects than a single building and he would like to take "a crack" at another.

Upstate Lenders

Willing

Lending today is a "roller coaster", Gross said, and it is driven by regulators. Therefore, he said, one must be terribly innovative and timing is key.

"The answer today is," he said, 'No! Now tell me why I should do it."'

Some of the more willing lending sources, Gross said, are Upstate banks - in such places as Buffalo, Rockchester, Troy, and Binghamton - that have already been through the turmoil. Foreign lenders, he said, are still coming in primarily as equity sources. They are coming, however, he said, from different places and different institutions and with different policies. Nonetheless, Gross said, the right properties in this area are financeable today.