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

The New Clean Air Act

September 16, 2010

Analysis of:The New Clean Air Act: An Environmental Milestone | EPA History | US EPA | www.epa.gov

What will be the impact on industries that have to comply withe the Clean air Act?

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

Tobacco Companies: A 270 Million Win!

September 16, 2010

Analysis of:The Associated Press: Scalia gives Big Tobacco $270 million reprieve | www.google.com

Should Tobacco companies be forced to pay for smoking cessation programs?

David McCainPartnerMPKA, LLC

Debt Restructure Case Study

September 15, 2010

Reprint from Nation's Building News - The Official Online Newspaper of NAHB Case Study: Developer is $300 Million in Debt and Sees $100 Million in Equity Disappear (This is the third 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 study was performed within this time frame.Case Study One — Strong History Development GroupA developer for more than 40 years, Strong History had 50 active developments with cumulative debt exceeding $300 million, all personally guaranteed by Founder.Founder’s personal balance sheet consisted of a few hundred thousand dollars in cash, with over $100 million of stated real estate equity spread over the 50 active developments. Unfortunately, a review by MPKA of the company’s projects and balance sheet found that the vast majority of the project finance loans were underwater (i.e., the loan amounts were higher than the projects were worth) and that Founder’s $100 million in equity was nonexistent at current real estate values.MPKA was subsequently engaged to negotiate with Strong History’s banks. Following are some of the specifics in these negotiations.Large National Bank Large National Bank had five project loans with Strong History totaling over $40 million located in Florida, North Carolina and South Carolina. MPKA negotiated a global settlement with the bank with the condition that each of the five debt restructure workouts was contingent upon the other:Loan One had an unpaid principal balance of $5.3 million. The project consisted of 210 entitled single-family lots, of which 110 were developed. When the loan was originated in early 2005, Strong History negotiated a finished lot takedown agreement with Large Public Builder at $70,000 per finished lot. When the market collapsed, Large Public Builder walked away from the property. With no sales, Strong History defaulted on the loan and Large National Bank filed a foreclosure action. The property design was fair to good but the location was fair to poor. Vandals repeatedly ravaged the utility boxes, fences and light poles. Several appraisals later, the property was eventually determined to have a value of $1.9 million. Neither Strong History nor Founder or any investor had interest in continuing with the property. Ultimately, MPKA convinced Large National Bank to take the property back in a deed in lieu of foreclosure transaction conditioned upon Large National Bank releasing Strong History and Founder from the $3.4 million deficiency. Loan Two had an unpaid principal balance of $6.1 million. The project consisted of 250 entitled single-family lots, 110 of which were developed, and 200 entitled undeveloped multifamily lots. The loan was originated in 2007. Several large national builders had finished lot option contracts ranging from $50,000 to $70,000 per lot, depending on lot size. The project was in a good location, but all of the large national builders walked from their option contracts. Loan Three had an unpaid principal balance of $14 million. The project consisted of 2,000 entitled single-family units, of which 400 were developed. Three large public builders had lot contracts with Strong History. While the builders did not walk from the property, each significantly curtailed the pace and price of its lot purchases. Both Loan Two and Three were in default and in foreclosure proceedings. Large National Bank received current appraisals totaling $15 million against a total debt of $20 million. MPKA arranged a transaction in which a private equity group purchased the two loans from the bank for $10.5 million, with the condition that the bank forgive all of the nearly $10 million in loan deficiency against Founder. In addition, with the bank’s consent, Strong History remained a participant in each of the loans on a management and development fee basis, and with a profit participation hope certificate after certain returns were achieved by the private equity group. Loan Four had an unpaid principal balance of $9.9 million. The project consisted of more than 200 acres of mixed-use development, with 300 entitled lots, half of which were developed, 50 acres of developed commercial land and 30 acres of undeveloped commercial land. The property was in a good location and was well positioned. Loan Five had an unpaid principal balance of $3.5 million. The project consisted of nearly 400 entitled but undeveloped single-family lots, many of which fronted the intercoastal waterway. Both of Loans Four and Five were in foreclosure, with no debt service payments made for more than 12 months as both loans had matured. Appraisals on these two loans varied, however; the lowest valued appraisals totaled over $30 million against nearly $13 million debt. MPKA negotiated a loan extension on each of the two loans, essentially convincing Large National Bank that in the absence of a takeout lender, the most reasonable chance for repayment was to extend each loan. They were both extended for 24 months with a 12-month extension option.Large Regional BankLarge Regional Bank had four project loans with Strong History, totaling over $25 million, located in Florida, all personally guaranteed by Founder:Loan Six had an unpaid principal balance of $3.1 million. The project consisted of 75 completed single-family lots. Two local builders had been buying lots at $80,000, but each walked from the community. The project and the lots were fair to good and recent appraisals suggested a value of $1.5 million. Loan Seven had an unpaid principal balance of $7.6 million. The mixed-use project consisted of 265 single-family lots, 225 multifamily lots and 25 acres of office and retail space. While entitled, none of this project was developed. A national public builder had an option contract at $70,000 per finished lot but walked when the project stalled. At loan origination, the project was appraised at over $18 million. Loan Eight had an unpaid principal balance of $10.5 million. The finished project consisted of 300 single-family lots but was in a poor location. Two national public builders walked from lot option contracts of $45,000. Recent appraisals suggested a value of less than $4 million. Loan Nine had an unpaid principal balance of $4.2 million. The project consisted of 165 finished single-family lots, optioned to two regional builders at $42,000 per lot. Each of the two builders slowed their lot takedown schedules to one lot per month.All of Large Regional Banks’ loans with Strong History were in default for nonpayment and in foreclosure. MPKA negotiated the packaged discounted sale of these loans for $10 million. In addition to eliminating the $15 million personally guaranteed deficiency of Founder, MPKA negotiated favorable loan purchase terms. The purchaser put $1 million cash down and received a loan back from Large Regional Bank of $9 million, three years interest only at prime plus 1%, totally non-recourse to the purchaser, and Founder was eliminated as a guarantor on the new loan. In addition, with the banks’ consent, Strong History stayed involved with each of the projects on a management and development fee basis, and as a profit participant, after certain investment returns were achieved by the new investor. Debt Restructuring Helping Builders Survive Today’s Financial CrisisBanks Provide Many Alternative Routes For Selling Debts 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.

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

Civil Lawsuits: New & Higher standards!

September 13, 2010

Analysis of:Wall Street Banks Benefit From Tougher Suit Standards in U.S. | www.businessweek.com

Should the Supreme Court make it so tough just to get your civil complaint past the pleadings stage?

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

Tort Reform: Is it Finally going to Happen?

September 10, 2010

Analysis of:Malpractice costs top $55 billion a year in U.S., Harvard study says | www.chicagotribune.com

Are the increasing costs in malpractice insurance going to force tort reform?

David McCainPartnerMPKA, LLC

Banks Provide Many Alternative Routes for Settling Debts

September 8, 2010

If you're having trouble viewing this email, you may see it online.Share This:Reprint from Nation's Building News - The Official Online Newspaper of NAHB Banks Provide Many Alternative Routes for Settling Debts (This is the second 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.Your initial consultation will include spending several hours discussing your projects, company, debt and finances.Be prepared to share large volumes of documents, including: loan documents, appraisals, tax returns and financial statements for all borrowers and guarantors, contingent liability schedules, developer schedules, global cash flow statements, historical financial statements, cash flow statements and balance sheets, historical unit activity, projected unit activity, copies of all bank communications, and, if there is any, a summary of litigation and its status.You can also expect the specialist to insist on visiting and inspecting your projects to really understand your business.The specialist will next tell you what you can reasonably expect. Possible outcomes are discussed below.The debt restructure specialist will then initiate communication with the bank, first building credibility; then educating the bank about the true value of the project and the financial capacity of the guarantor; and next determining what the bank needs, whether it wants cash, performing loans or taking title.The remaining negotiations will largely be spent structuring a transaction and price that is acceptable to the bank, and, most importantly, arranging the capital to make the transaction work. The best negotiated transaction is worth nothing without the capital in place to execute it. This will include soliciting offers from potential purchasers of the note to determine the accuracy of the most recent bank appraisal.Realistic ExpectationsFrom 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 specialist will want to proceed as expeditiously as possible.It is helpful during this phase for the borrower or a financial officer on the staff to be standing by to answer questions.Your specialist will be negotiating with the bank on the financial capacity of the guarantor to contribute toward any potential deficiency. Payment toward the deficiency can take many forms, such as cash, unsecured notes, liens or pledges on other collateral, transfer of title to other property, cars, other items or combinations of these. Of course, there are many instances where there will be no contribution toward a deficiency.Most debt restructure specialists work for a modest, hourly fee for overhead and a contingent fee that is typically based on a percentage of the amount of debt or personal guaranty forgiveness the specialist succeeds in obtaining during the negotiations.Restructure Methods and Potential Outcomes These are the basic methods of restructuring debt, each with several offshoots and variables:Loan extension. This is the simplest, occurring in the rare instance when the loan is not underwater. For instance, the loan has simply matured, the collateral value still supports the underwriting loan-to-value ratio, the bank has called the loan at maturity and there was no take-out lender or principal pay-down available. In this instance, negotiations would typically center around the fact that absent other lenders or capital, the best form of repayment is an extension, preferably without a loan fee and at a prime-based interest rate. A and B note structure. This is a more complicated extension where the bank recognizes that the loan amount exceeds the collateral value and bifurcates it into two separate notes. The A note continues to be secured by the original loan collateral. The face amount of the A note allows the bank to treat it as a performing loan, or “admitted asset.” That value can be determined by statutory loan-to-value ratios, adequate reserves for taxes and insurance and the demonstrated capacity to pay, or an escrow account, for interest and principal payments. In essence, the A note reflects the true loan-to-value of the property today. Some portion or all of the remaining original debt would be in the form of an unsecured B note. Also known as a “hope certificate,” the B note is the amount of the original loan that has been statutorily written off. The bank hopes to collect some of this write-off if the property performs and the cycle turns positive in the future. For an A and B note to be truly helpful to the borrower, the amount of any potential deficiency needs to be determined up front so the borrower knows how much of the B note, if any, continues to be personally guaranteed. Also, there has to be new capital in place to service the A loan to allow the bank to ultimately categorize it as performing. Discounted loan purchases. These are easy to understand. The bank agrees to sell its loan at a discount to par, or face value. The intricacies here center on who purchases the discounted note. If coordinated through the debt restructure specialist, the purchaser will be aligned with the borrower. If sold by the bank of its own accord, borrower beware. In a coordinated effort between the debt restructure specialist and the borrower there can be control over whether the borrower stays involved with the property to develop, earn fees or share in profits, whether the borrower gets a clean walk away from the property and, perhaps most importantly, how much, if any, of the note purchase discount the purchaser will share with or pass on to the borrower. An adversarial note purchaser can chase the borrower for the entire debt and the full guaranteed amount, regardless of the discounted purchase. The purchaser might also have the goal of foreclosing and taking title to the property, essentially evicting the borrower. In any case, if the bank sells the note to a party that you don’t have an agreement with, you have lost complete control of your project and that usually ends badly. Deeds in lieu of foreclosure, friendly foreclosures or transfer of title. These are also easy to understand. Here, the borrower agrees to surrender title of the property to the bank unopposed. Again, as in a discounted note purchase, this effort needs to be coordinated so that any surrender of title is absolutely coupled with a full and final determination of what the contribution toward any potential deficiency may be. We strongly advise against surrendering title, having the bank liquidate or sell the property, ascertaining what the deficiency is at that time and then negotiating payment. Keep title to the property until the deficiency is resolved; having title is your best leverage for a fair resolution. Liquidation of loan collateral. This is similar in concept to a deed in lieu of foreclosure. Liquidation can take several forms, but will likely occur through a short sale or auction. In a short sale, the loan collateral is advertised for sale at a price that is insufficient to pay off the loan balance in full. Typically, in order to expedite the sale, an initial price is set and periodically reduced, say every 30 days, until there is a contract on the property. In an auction, there is certainty of the date on which the property will be sold, but not on the sale price. The auction company will provide the advertising and marketing and then sell the property on a date certain. Either way, whether through short sale or auction, the most important aspect of liquidation is having the debt restructure specialist coordinate these efforts so that the bank agrees to accept the sale proceeds on an absolute basis and the amount of contribution toward a deficiency, if any, is known up-front before the sale occurs. click here. 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

Debt Restructuring - Homebuilder and Developer Financial Crisis

September 2, 2010

Reprint from Nation's Building News - The Official Online Newspaper of NAHB Debt Restructuring Helping Builders Survive Today’s Financial Crisis (This is the first 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 Even as the promise of a housing recovery moves closer into sight, debt restructuring is the name of the game for many builders in their attempt to set themselves on a realistic course and survive the worst economic times since the Great Depression. There is a natural progression of emotions that unfolds as we see our financial world disintegrate around us. Initial thoughts center on protecting the equity we have invested in our projects, and for many this can represent years of profits, time and personal guarantees rolled over from one community to the next. As real estate entrepreneurs, we understand dirt, real estate and hard assets and tend to shy away from paper stocks and bonds. Unfortunately, in an effort to protect what we have, we continue to make payments against a loan and a project that will never pencil out under current conditions. Embracing self denial, we can’t believe that our project will fail. With a Herculean effort, we know we can make it succeed. So we embark on the impossible task of seeking take-out capital at full origination value in a market that most likely doesn’t even support half of that value. Eventually, we begin to capitulate, both emotionally and financially, as we realize that our project just doesn’t support its original value, we have run out of money to support it and we are not going to be able to convince anyone to invest in it despite our best efforts. Ultimately, we are forced to seek help. Shortcomings of Self Reliance After realizing that a project is in need of significant financial right sizing and requires debt restructuring, it is only natural to want to attack the problem ourselves. For some, this method can actually succeed. After all, why incur the expense of hiring a professional if you can find the solution yourself? But for most builders, hiring a professional is the most economically beneficial alternative. Too often, self-help advocates are too emotionally invested in the project, in their personal balance sheet (exposed as a result of personal guarantees) and in their relationship with the bank officer to be successful. More often than not, the banker with whom we have been friendly for 20 years is replaced by a skeptical work-out officer, or, worse yet, our bank gets taken over and is merged or falls into government control. As a real estate entrepreneur, we may have spent an entire lifetime making our financial resumes as strong and viable as possible. But in the debt restructuring arena, the weaker the financial resume, the greater is the likelihood of reducing or eliminating lender demands for payments on bloated loan balances or contributions towards personal guarantee obligations. Humility, not hubris, is the winning formula for a successful outcome. Legal HelpOnce we have decided we need help, the next natural inclination is to engage legal counsel. This can often be counterproductive.While some attorneys are exceptional negotiators and deal makers, many are fierce advocates, trained to win at all costs. But regardless of that, as soon as you communicate to the bank that you have hired counsel, all direct bank communication will cease. With a fiduciary responsibility to do so, the bank will hire counsel to speak to your counsel. As a result, your communications, now filtered, will become more guarded and formal (not to mention the fact that you will end up paying the fees for both your counsel and the bank’s counsel). In most instances, the bank will hire litigation counsel that is well versed in foreclosure and collection. Your counsel will need to be well versed in debtors’ rights and borrower defenses. The game plan will change from workout and restructure negotiations to a battle over taking or keeping title to the property and valuing the property so that your personal balance sheet can be attacked. Any negotiations from this point forward will likely occur after each litigation milestone is reached and as leverage changes in favor of one party or the other depending on the outcome of each step. At this point, the bank will seek to enforce the four corners of the loan documents by taking title and collecting any deficiency due against the note as a result of the diminished property value. You will absolutely be playing defense in this scenario. Judgments obtained in most states are recorded and are collectable for up to 20 years. In addition, to help execute them most states allow a creditor to take depositions in which you will have to disclose your entire financial life and produce a massive amount of financial documents. As you can easily see, playing out the litigation process is wrought with peril and uncertainty, except for the certainty of cost, time and expense. No Substitute for ExperienceThe help that builders need is most likely to come from a debt restructure specialist, who negotiates loan workouts and creative solutions to real estate and financing issues in a controlled and non-confrontational environment. The right debt restructure specialist can be welcomed as a participant by both the bank and the borrower. The effectiveness of the debt restructure negotiator depends on many factors. The most successful typically possess a unique combination of skills and professional experiences not easily duplicated, coupled with credibility and professionalism. The ideal attributes of this specialist are first, the lack of emotional attachment to the original real estate project or the balance sheet of the borrower, guarantor or bank. Next, the ability to evaluate a project from a multitude of perspectives is essential. For instance, the specialist should have lending experience to be able to appreciate and understand banking issues and processes, including: risk-based capital and loan-to-value issues; accounting laws and banking regulations that artificially create opportunities or requirements to take or forgo certain actions; experience and understanding of loan and special asset committees; skills to evaluate the capacity to pay; and the ability to communicate to bankers on this level. In addition, the specialist should have experience as a borrower, home builder and developer, so there is familiarity with operational, development and entitlement issues, sales and marketing, demographics, appropriate product offerings and mixes, development timelines and the resources required to make a project successful. Also, the specialist should have experience as a private equity investor, so there is an understanding of the returns investors expect, investment timeline horizons and the relationships within the private equity arena needed to provide a ready stable of available capital to support restructuring solutions. Finally, the specialist should have legal and litigation experience to be knowledgeable of the differing foreclosure laws and timelines of each state, including insolvency and bankruptcy issues. And while this mix of lending, developing, investing and legal experiences is ideal, it still needs to be coupled with the ability to analyze potential resolutions from all four perspectives, create a solution and then mediate a fair and acceptable resolution for all. There is no substitute for experience. Your vetting process should include a careful review of candidates’ backgrounds and experience in the four areas discussed above. Choose debt restructure specialists that have a proven track record of results in today’s environment. The next article in this series will describe the debt restructuring process, realistic expectations, restructure methods and potential outcomes. In future articles, the debt restructure specialists of MPKA will delve into case studies of recently transacted deals. 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

Uncertain, and scary times...

August 24, 2010

Uncertain, and scary times in the stock market are nothing new.  Today many various markets, banking, finance, insurance,  general industries, and various investment vehicles are under uncertain, and scary times.

Mark MariottiChief Executive OfficerFuture Management Holdings Inc

US Socioeconmic Bracket Creep

August 16, 2010

Analysis of:Reagan insider: 'GOP destroyed U.S. economy' | www.marketwatch.com

US Socioeconomic Bracket Creep - The trigger will be the growing gap between economic classes. During the last financial bubble (from 2002 to 2006) the top 1% of Americans received two-thirds of the gain in national income, while the bottom 90% got only 12%. This growing Socioeconomic wealth gap is not the financial market's fault, it's the decaying fruit of bad economic policy.

Mark MariottiChief Executive OfficerFuture Management Holdings Inc

The New Normal Ab-Normal

August 14, 2010

Analysis of:The Point of No Return | www.theatlantic.com

The New Normal Ab-Normal has begun - we must go forward with better intel and more of a focus on preservation of capital v risk reward.My thoughts on the potential impacts on capital flows and more specific on European real estate either way should issues remain on the current course, if an Israeli air strike could unfold, are very bleak in any outcome other than peace.

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