GLG News by Title Insurance Experts

Martin AlpertPresident, Environmental Claims, The Sandner GroupHINZ CLAIM MANAGEMENT INC

Sherwin-Williams: Who is Hot on their Trail?

October 23, 2010

Analysis of:Law And More: "Sherwin-Williams v. Motley Rice, et al." - That scene when Bonnie | lawandmore.typepad.com

Is there any light at the end of the litigation tunnel for Sherwin Williams?

Martin AlpertPresident, Environmental Claims, The Sandner GroupHINZ CLAIM MANAGEMENT INC

Apollo Group: 2 More States Want More!

October 21, 2010

Analysis of:oregon to take lead in apollo lawsuit | www.azcentral.com

Did the Apollo Group mislead, or was it misinterpretation?

Martin AlpertPresident, Environmental Claims, The Sandner GroupHINZ CLAIM MANAGEMENT INC

Foreclosure Moratorium: Is it a Go?

October 20, 2010

Analysis of:White House rejects foreclosure moratorium | Reuters | www.reuters.com

Is a Foreclosure Moratorium likely and what are the possible residuals?

Martin AlpertPresident, Environmental Claims, The Sandner GroupHINZ CLAIM MANAGEMENT INC

Tobacco Litigation: Another Upward Trend!

October 14, 2010

Analysis of:Tobacco Lawsuits Puff Along In Florida | online.wsj.com

With the economy in turmoil and the stock market shaky will tobacco litigation have any hiatus?

Mark MariottiChief Executive OfficerFuture Management Holdings Inc

Real Estate Investing

October 8, 2010

Several interesting situations are developing for Real Estate Investing in the U.S.

Mark MariottiChief Executive OfficerFuture Management Holdings Inc

Baby Boomer's Portfolio

October 1, 2010

Analysis of:The Baby Boomer’s Case for Gold | seekingalpha.com

A major shift in investment allocation is made daily via the 74 million Baby Boomers (boomersindex.com).

David McCainPartnerMPKA, LLC

Debt Restructuring: Moderating Factors and Lessons Learned

September 30, 2010

Reprint from Nation's Building News - The Official Online Newspaper of NAHB Debt Restructuring: Moderating Factors and Lessons Learned (This is the fifth and final article in a series on what builders need to know about restructuring their debt and planning for surviving financial adversity in today’s real estate market.) By David McCain and Bill Albers, MPKA, LLC Once a debt restructuring specialist has been hired and the process of restructuring begins, there are many factors — both subjective and objective — that can come into play and affect the outcome of the negotiations and the timeliness of the deal.From a subjective standpoint, all of the participants — the borrower, capital provider, lender, outside counsel and debt restructure specialist — have different perspectives, goals and personalities that must be taken into account:Borrowers are motivated by financial survival, protecting their personal balance sheets and devising a strategy that will enable them to still be around to profit during the next positive business cycle.Capital providers and investors are focused on safety, risk avoidance, investment time horizons, geography, asset type, size and class, credibility of the developer and healthy returns.Lenders are focused on the balance sheet, risk-based capital ratios, earnings and quarterly profit and loss reporting. In fact, our experience is that the vast majority of debt restructure workouts are finalized during the last 15 days of a fiscal quarter. In addition, bank officers and special asset managers are driven by job retention and obtaining appropriate data summaries to support negotiated resolutions in asset review committee.Outside counsel is focused on carrying out the client’s orders — collecting as much as possible for the lender or paying as little as possible if representing the borrower. This inherent conflict will continue to manifest itself throughout the documentation process, even after there is a verbal agreement or written outline of the restructure settlement terms. For this reason, it is important to keep the debt restructure specialist engaged during the documentation phase to continue to referee the settlement.Finally, the debt restructure specialist is motivated to negotiate and mediate an effective and fair resolution. The goal is simple: get to the workout and settlement phase of the conflict as quickly and efficiently as possible while avoiding the unnecessary cost, time and labor associated with most litigation or conflict resolution procedures, or the inaction that often results from self-help remedies.In addition to accounting for the dynamics of the various players in the debt restructuring process, objective factors need to be taken into consideration in order to achieve a successful resolution. Among the many issues that can arise:Whether the debt is recourse or non-recourse. Is the debt personally guaranteed?Whether the debt is underwater, and if so, by how much.Whether the lender has a true value of the property, such as a recent appraisal.The state law debt enforcement procedures. In a judicial foreclosure jurisdiction, the procedure can typically take 12 to 18 months, compared to a trustee sale jurisdiction, where it is 30 to 120 days.The type of lender. Is it a regulated entity such as a bank or insurance company, or non-regulated such as a private equity group? Much of the accounting that is required of regulated lenders is absent in a non-regulated environment.Disparate financial capacity of multiple guarantors.Project quality, geographic location, size and stage of completion.The integrity and quality of the borrower, which may lead the lender to perceive that the borrower “won’t pay” vs. “can’t pay.”Loan status — current, matured, monetary default, non-monetary default, foreclosure or bankruptcy.Single or multiple lenders.Organization and record keeping of the borrower.Lessons LearnedFrom the standpoint of a builder or developer, debt restructuring can be a frustrating and emotional process. One minute can bring fear and the feeling of helplessness, and the next a sense of excitement over the possibility of a rescue. In this series of articles, we have discussed the shortcomings of attempting to negotiate on your own behalf, the confrontational nature of employing legal help and the potential benefits of engaging a debt restructure specialist.We reviewed the debt restructure process itself, its typical length (three to six months) and the exchange of information needed to proceed toward a resolution. We also reviewed the possible outcomes in detail — including loan extensions, A and B note structures, discounted loan purchases, deeds in lieu of foreclosure or title transfers to the lender, and loan collateral liquidation.Finally, we reviewed actual debt restructure case studies involving builders and developers of varying size and experience; with properties in different geographic locations, having multiple sizes and product types, in various stages of completion; and with several lenders.From the authors’ view, helping borrowers sleep better at night by providing financial certainty in a highly stressful environment is extremely rewarding. Helping lenders get through the decision-making process in an expedient fashion is also satisfying. We look forward to continuing to do our small part to get this economy back on track, get developers and builders back to work and place serviceable real estate back in the market at right-sized prices. Debt Restructuring Helping Builders Survive Today’s Financial CrisisBanks Provide Many Alternative Routes For Selling DebtsCase Study - Developer is $300 Million in Debt and Sees $100 Million in Equity DisappearCase Study - Developers Climb Out of Debt and Live to See Another Day David McCain and Bill Albers are the principals of MPKA, LLC. They have successfully restructured more than $1 billion worth of home builder and developer debt over the last 24 months. They can be reached by visiting www.mpka.com.

David McCainPartnerMPKA, LLC

Developers Climb Out of Debt and Live to See Another Day

September 25, 2010

Reprint from Nation's Building News - The Official Online Newspaper of NAHB Case Study: Developers Climb Out of Debt and Live to See Another Day (This is the fourth in a series of articles on what builders need to know about restructuring their debt and planning for surviving financial adversity in today’s real estate market.) By David McCain and Bill Albers, MPKA, LLC You have made the decision to hire a debt restructure specialist, and the process begins. From the time you hire a debt restructure specialist to the time you reach a settlement can take as little as 60 days or as long as a year, but the process is typically completed within three to six months. The following case studies were performed within this time frame.Case Study — Great Reputation BuilderA builder on the east coast of Florida for more than 20 years and the winner of numerous awards, Great Rep had three active but stalled communities and was facing $62 million of debt, all personally guaranteed by Founder.Great Rep bought and developed its own land, and built, marketed and sold its own product. Like many small to mid-size builders, Founder spent 20 years rolling nearly all of his profits from completed deals into new deals. When MPKA met Founder, $18 million of accumulated profits, his life savings, had been used as equity seed capital for Great Rep’s three current communities. Unfortunately, while Great Rep, Founder and the banks were focusing on ways to extend each of the three loans supporting the three communities, none of them were addressing the real issue, which was that all of the communities were severely underwater, with the loan amounts far exceeding the property values.At this stage, with the loans in default and discussions at an impasse, MPKA was engaged by Great Rep and Founder to negotiate with Great Rep’s banks. Following are case studies involving these negotiations.Loan One was comprised of more than 150 finished single-family lots and 20 completed inventory homes. Great Rep owed approximately $14 million on the lots and another $10 million on unsold inventory homes and models. The bank’s release prices were $100,000 per lot and $525,000 per home. The total debt on Loan One was over $24 million and Great Rep had invested $6 million of equity in support of the development. This luxury product was well conceived and constructed. Seventy homes had been completed and delivered, but the project was completely stalled, with the inventory homes the result of cancelled contracts. MPKA coordinated a structured transaction that allowed Great Rep to liquidate inventory, continue operations, avoid a large deficiency and recoup a portion of its original project equity. First, MPKA negotiated a deeply discounted debt purchase on the lot note using capital from newly found Financial Partner. The $14 million debt was purchased for $4 million. Additionally, as a prerequisite to the loan sale, Financial Partner purchased Founder’s guarantee. It next agreed to waive any potential deficiency claim against Founder and released him from any future guarantee going forward. In addition, by structuring the sale as a note purchase instead of a property short sale, Great Rep potentially avoided phantom income debt forgiveness of nearly $13 million and tax obligations of more than $4 million. To dispose of the inventory, MPKA partnered with an auction company and sold all 20 homes on an absolute basis tendering all proceeds net of closing costs to the bank in total satisfaction of the $10 million inventory note. Lessons learned from Great Rep’s largely unsuccessful attempt to auction off the properties a few months earlier helped bring the superior results. Only four homes were sold in the first auction, at an average price of $240,000. In the auction of the remaining 20 homes, the average price exceeded $310,000. In addition, despite the challenges of the ongoing credit crisis, MPKA leveraged its mortgage lending relationships and expertise to arrange for a consumer mortgage lending company to pre-approve the community and finance purchases at the auction. Great Rep was allowed by Financial Partner to continue to market, sell and build homes on the purchased lots as a fee builder. In addition, Great Rep was given a profit participation position after specified return hurdles to Financial Partner. Loan Two was originally for a $27 million development comprised of 60 single-family lots and 21 boat slips on the intercoastal waterway, with the anticipated construction of homes valued between $900,000 and $3 million. It took three years just to obtain the boat slip permits. The loan was comprised of $21 million in acquisition and development debt and approximately $6 million of Founder’s equity. Less than 5% of the final infrastructure work needed to be completed — in 90 days at an estimated cost of about $1 million. With the evaporation of the local market and personal capital, Great Rep found itself unable to make its loan payments, at which point the bank stopped funding construction. The loan went into default, construction was halted and the bank initiated foreclosure. MPKA coordinated a structured transaction that allowed Great Rep to continue operations, avoid a deficiency and have an opportunity to recoup equity and earn a fee. First, although the bank had received two recent appraisals of the property greater than $17 million, MPKA knew it was under regulatory pressure to liquidate assets and got it to accept a discounted note purchase price of $10 million. On behalf of Founder, MPKA also negotiated a release of the guarantee and deficiency claim with Financial Partner, the note purchaser. By structuring the transaction as a note purchase instead of a short sale, Great Rep was able to avoid $11 million of debt forgiveness phantom income and a tax obligation of $4 million. Great Rep remained in the deal, completed the infrastructure with capital from Financial Partner, marketed the lots for sale and received a management fee and profit participation from Financial Partner. Loan Three was for a $23 million development comprised of 85 luxury town homes just blocks from the Atlantic Ocean in a beautifully revitalized pedestrian urban infill location. While all of the site work and pads were finished, only one seven-unit building was completed and only two units were sold. Original selling prices ranged from $500,000 to $875,000. The remaining construction loan was $17 million, and Founder had invested $6 million. MPKA negotiated a transaction that allowed Great Rep to continue operations, avoid a deficiency and earn fees. MPKA convinced the bank to accept $8 million on a discounted note purchase. Two current bank appraisals valued the collateral at $15 million in its partially completed state, but MPKA convinced the bank that the appraisal was far too high because it overestimated the units’ market absorption and their ultimate selling prices. As part of the transaction, MPKA was able to negotiate the elimination of any potential deficiency against Founder by structuring the deal as a note purchase instead of a short sale. As a result, Great Rep avoided phantom income debt forgiveness of $9 million and $3 million in taxes. In addition, MPKA was able to secure a commitment from a third-party lender to provide a construction revolver to build out the remaining town home units despite the constrained credit market. As with its two other deals, Great Rep remained engaged as a fee manager with a profit participation. Case Study — Direct Equity, Debt Restructure and Tax IncentivesThe developer of active adult communities in central Florida for nearly 100 years, Fourth Generation Builder had five active communities with slowing sales volume. None of Fourth Gen’s $25 million in project debt was guaranteed. In addition, Fourth Gen’s bank had issued a short-term debt — secured by Fourth Gen’s profit sharing plan — of $18 million.At the recommendation of its lender, Fourth Gen engaged MPKA to restructure its debt, raise capital and review expenses just 14 days before the end of the company’s fiscal year. About to run out of cash within 90 days, Fourth Gen needed a survival plan that would provide more than $10 million. After reviewing Fourth Gen’s balance sheet, assets, operations and expenses, MPKA provided a solution that provided in excess of $17 million of savings, cost reductions and capital.In Fourth Gen’s largest community, it owned 150 finished single-family lots and another 450 entitled lots. The finished lots had book value of $8 million, or $55,000 per lot. Of the few sales it had, Fourth Gen was able to sell home buyers finished lots on which it would build within two years for between $80,000 and $150,000. Fourth Gen’s bank had loaned $5 million, or $35,000 per finished lot. The loan was performing. MPKA convinced the bank to write down the loan to $2.9 million, or $20,000 per lot, and then accept a deed in lieu of foreclosure from Fourth Gen. As a result, Fourth Gen was able to show a capital loss of $2.2 million and consequently recapture $1 million in previously paid taxes under FAS 109 rules. The bank did not want to own the lots and was facing its own fiscal year-end 30 days later, which made it a highly motivated seller. Within those 30 days, MPKA negotiated the purchase of the lots at the written down value and it subsequently marketed them, several of which were available to Fourth Gen on an escalating option basis.This survival plan enabled Fourth Gen to stay in business in its original ownership for two more years. However, the debt burden of the company’s profit sharing plan and land loans ultimately became too great. Accordingly, MPKA brought in a new set of investors who purchased most of the remaining assets, assumed the liabilities for the homes under construction and the employee costs, and restarted Fourth Gen under a capital structure that has allowed it to continue to build profitably to this day.The final article in this series will discuss potential moderating factors within the confines of the debt restructuring arena and review some of the lessons that have been learned. Debt Restructuring Helping Builders Survive Today’s Financial CrisisBanks Provide Many Alternative Routes For Selling DebtsCase Study - Developer is $300 Million in Debt and Sees $100 Million in Equity Disappear David McCain and Bill Albers are the principals of MPKA, LLC. They have successfully restructured more than $1 billion worth of home builder and developer debt over the last 24 months. They can be reached by visiting www.mpka.com.

Mark MariottiChief Executive OfficerFuture Management Holdings Inc

Social In-Security

September 24, 2010

Analysis of:Social Security: Where Do We Go From Here? | www.aarp.org

Is Social Security an annuity or entitlement? 

Martin AlpertPresident, Environmental Claims, The Sandner GroupHINZ CLAIM MANAGEMENT INC

United Healthcare: A 350 Million Settlement!

September 21, 2010

Analysis of:$350 Million UnitedHealth Class Action Settlement Approved | www.law.com

Should the licensing of heathcare providers be in jeopardy when there is evidence of collusion?

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