Matt Mason and Lauren Leach: Repositioning Real Estate – Turnarounds & Workouts
Matthew Mason and Lauren Leach were interviewed in Turnaround & Workouts‘ article titled “Repositioning Real Estate: Conway MacKenzie and A&G Talk About Maximizing Value.”
As the real-estate sector faces significant headwinds from weak business fundamentals, such as excess supply and high leverage in both the commercial loan and commercial mortgage-backed securities (CMBS) markets, two firms have launched real estate-related practices to provide expert counsel to maximize real estate value through the repositioning of assets for both short- and long-term growth. In May, Conway MacKenzie launched a real estate advisory services practice, and A&G Realty Partners launched a non-retail properties division. In this two-part series, we asked members of both groups to explain more about what they do – and opine on the outlook for the sector.
How are you helping clients maximize the value of real estate?
Mason: Just as all real estate is unique, so is the strategy for maximizing the value of real estate. We understand that a lender or special servicer typically has a different, and substantially shorter, time horizon than an investor in which to monetize a real estate investment. A lender’s goal is usually to maximize short-term value and dispose of an asset in order to achieve maximum loan recovery – often without contributing additional capital to the project. An investor, on the other hand, is typically focused on maximizing cash flow as well as future disposition value and is more willing to inject capital and tolerate a longer hold period. We have proven strategies for both scenarios and everything in between.
Are you doing anything new or unique?
Mason: We are closely following tenants, especially retail tenants, in order to ensure that our assets are ahead of coming distress. For example, in a recent receivership assignment we preemptively identified the non-viability of Gordmans Stores and proactively sought a replacement tenant in advance of its bankruptcy filing, wherein the landlord would lose control of its real estate. Given the large, prominent position of the store at the front of the center, the success of the tenant in this location was of utmost importance. Using a targeted marketing campaign to tenants who could backfill the location, we were able to orchestrate a lease restructuring and assignment from Gordmans Stores to Art Van furniture, a dominant home furnishing retailer with a much stronger balance sheet.
Can you provide some examples of how you can maximize Real Estate value?
Mason: We believe that each dollar saved on the expense side of the ledger is just as valuable as the dollar earned on the revenue side. Replacing tenants is often a long, expensive process and, as such, a strong focus on tenant-retention is fundamental to value creation. Another avenue for value creation is to craft a dynamic tenant mix at properties. The lines between multifamily, office, and retail continue to blur as evolving preferences and demographics favor developments that combine the liveshop- play theme. Establishing a diverse asset that appeals to a wide audience separates itself from the competition.
Leach: Concrete examples include targeting synergistic tenants for the lease-up of our assets, examining and reducing operating expenses where
appropriate, coordinating tax appeals, modernizing systems to generate energy efficiencies, reconfiguring space, and raising rents.