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Retail REO Expert Provides Tips for Dealing with Distress

Retail REO Expert Provides Tips for Dealing with Distress

When the credit crunch took hold in late 2008, there were expectations that there would be a pressing need for receivers and REO specialists as banks and special servicers grappled with troubled loans. Instead, lenders “kicked the can” down the road, extending loans whenever possible rather than dealing with properties.

Yet through all that some firms have been able to build successful receivership businesses. In the Northeast, North Plainfield, N.J.-based Levin Management Corp., has had a steady stream of receivership and REO work on retail properties. Levin’s management and leasing portfolio includes more than 90 retail properties totaling more than 12.5 million sq. ft. in New Jersey, New York, Pennsylvania, Virginia, North Carolina and Florida.

For example, in April 2010, Levin Management was named the court-appointed receiver for ITC Crossing North, an 180,000-sq.-ft. shopping center in Mount Olive Township., N.J. Levin was brought in to fill about 20,000 sq. ft. of vacant space and also manage day-to-day operations of the center.

In addition, in January 2011, the firm was named the exclusive leasing and managing agent for the retail component of the Livingston Town Center mixed-use complex in Livingston, N.J. The project was an REO property owned by an undisclosed bank.

With banks and special servicers now starting to be more aggressive in dealing with troubled loans, Levin expects more opportunities to emerge in 2011.

Retail Traffic Editor-in-Chief David Bodamer spoke with Robert Carson, executive vice president of Levin Management Corp., to discuss trends on distressed retail properties and lessons the firm has learned in dealing with troubled assets. What follows is an edited transcript.

Retail Traffic: How did Levin get started in the REO business?

Carson: We did some work in the last cycle, 10 to 12 years ago. That’s when some lenders contacted us to say they were taking back properties or needed to put them into professional management. We really cut our teeth on that. Today’s work is a natural progression of that. We also feel it’s a natural outgrowth of our management and leasing.

Retail Traffic: Commercial real estate professionals expected a big wave of distressed properties for a long time. That never materialized. But do you see volume picking up in 2011?

Carson: We are seeing some lenders and special servicers expressing a greater need to pay attention to these properties than they were doing 12 to 18 months ago. There’s a huge amount of maturing debt coming due in the next few years. Lenders were willing to do nothing and wait it out with borrowers, hoping that things were going to get better. Now as the economy has sort of made some progress, we’re seeing those special servicers and lenders looking to people like us to take over properties. They want to try to increase the value and get them on the market so they can deal with their distressed debt situation. So we’ve seen more activity.

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