By Carrie Rosenfeld | Orange County
TUSTIN, CA-While receivership properties can and do sell, as GlobeSt.com reported on earlier today, lenders who are hoping that debt will be modified and assumed by buyers once the properties are in receivership are having their hopes dashed by the reality of the lending climate. Pat Galentine, a principal with Coreland Cos. and a State Court-appointed receiver, tells GlobeSt.com that many lenders had thought putting distressed properties into receivership would enable the debt to be modified and handled by future buyers, but with the current low-interest-rate environment, this hasn’t become a growing trend.
“I’ve only done one receivership sale where the debt was actually modified,” Galentine says. “Most are finding that it’s too long and cumbersome a process and doesn’t make sense.”
He adds that there has to be some reason to sell a property in receivership, such as physical issues or timing from a lender perspective. “That can be a little bit of a misnomer because it can be difficult to sell a receivership property quickly—you have to find the right buyer, one willing to take it or leave it. You need buyers willing to step up and close quickly in that environment, and they are out there. They tend to be all cash and more sophisticated; they usually have a real estate background and understand receiverships and how they’re buying it from the get-go.”
Galentine says the market is going to see more of these receivership sales, “but not in the volume that everybody thought it was going to be. It was a big hot topic two to three years ago, and it’s still out there, but it’s more on a one-off basis—there aren’t volumes and volumes of them.”
Selling out of receivership comes down to a distressed asset, he adds. “The hotter product types don’t really need to sell out of receivership—it isn’t that much of a benefit to them.”