Ron Bruder - the Brookhill Group: turnaround ace sees opportunity in many disguises.

Opportunity funds have been high-profile players on the real estate scene ever since the boom and bust days of the 1980's. Lesser known, however, are the handful of well-established firms that focus on the hands-on work of translating opportunity into real gains - the turnaround specialists.

"Opportunity funds make their impact essentially by buying low, adding value in some cases, and then waiting for the inevitable recovery," observes Ronald B. Bruder, founder and president of The Brookhill Group, one of the most experienced and successful turnaround firms. "But in our work, market recoveries only improve our performance. We buy problem properties that make sense to improve, independent of the whims of the marketplace."

Manhattan-based Brookhill has the track record to support such confident words. The 20-year-old firm found its long-term niche as a "re-developer" in the mid-'80s, after marginal real estate in the Sunbelt and then other regions took a nosedive.

"Since so much new development had been spurred by the tax-shelter syndication craze, the general belief was that all troubled property was simply a result of overbuilding," Bruder recalls. "A lot of it was, of course, but people forgot that strong management and leasing capabilities, good market research and keen insight counted as well."

"Consequently, we identified many distressed properties that had great potential and could be rescued by changing their market focus, adding amenities, working with the municipality to improve traffic flow, installing tenants that complemented successful nearby facilities, or simply by making the property look better," he says. "That's how we learned to distinguish ourselves in the real estate industry."

Brookhill became particularly adept at restoring and growing the value of moderate-sized shopping centers. Its earliest successes were in markets such as Birmingham, AL, West Lafayette, IN, and Manchester, NH, where community retail centers with substandard cash-flows were transformed into strong income producers. A typical example is the Huntsville (Alabama) West Shopping Center, where Brookhill bought out below-market leases of poorly performing tenants, upgraded the tenant mix, installed a traffic light, expanded the center, and refurbished the exterior, raising net operating income by over 300 percent over several years.

In the mid-1990's, however, Bruder has taken Brookhill far beyond the purview for which it became known a decade earlier. Today, the firm focuses heavily on the most distressed of all properties - those with environmental contamination.

In the wake of the Superfund failure, the reclamation of "brown fields" - as moderately contaminated property is commonly known - has been an intriguing subject in the real estate community and among government agencies for much of the 1990's. But until Bruder stepped in to help create a brownfields marketplace, nothing much happened.

"Brownfields was a little like the weather, in that everyone talked about it but no one did anything about it," he quips. "The reason Brookhill got involved is that occasionally we came across a potential acquisition we liked, except that it had various underground contaminants - perhaps the chemicals from a dry cleaning store or underground leakage from a nearby gas station. If the property was truly compelling to us, we turned to a leading international environmental engineering firm, Dames & Moore, to determine whether the problem was fixable at a cost that made economic sense."

In that way, a strong working relationship evolved between Brookhill and Dames & Moore, a Los Angeles-based, New York Stock Exchange-listed firm with offices around the globe. The two decided to form a 50-50 partnership devoted exclusively to brownfields investment, Dames & Moore/Brookhill, LLP.

But teaming with one of the world's most respected environmental engineering firms was only step one for Bruder. Next, he turned to Wall Street for the massive financing that would be needed. Bruder persuaded an affiliate of Credit Suisse First Boston of the enormous potential in brownfields, and the result in 1996 was an initial $190 million commitment - Wall Street's first in the realm of contaminated real estate.

So far, Bruder is more than half-way through the current war chest, having bought a $72 million portfolio of 24 properties and mortgages on contaminated properties from the liquidators of Confederation Life Insurance Co., as well as various other properties in Colorado, Indiana, California and Florida. Some of the assets it acquired already have been re-sold profitably. And by next year, Bruder expects Dames & Moore/Brookhill to be additionally capitalized with another infusion in excess of $200 million.

"The time is right for brownfields," he says, citing improved insurance products to relieve sellers of future liability, more sophisticated clean-up technology, new regulatory requirements that encourage publicly-owned companies to dispose of contaminated real estate, and state initiatives (not including New York, by the way) that make brownfields reclamation more economically feasible.

"I see Dames & Moore/Brookhill leading a multi-billion-dollar marketplace within four years," he says.

Today, Bruder has added another entry to his list of passions. Besides his roles as president of Brookhill and chairman of the board of managers of Dames & Moore/Brookhill, Bruder heads a medical technology company called Gynetech Laboratories, Ltd., which works toward population control and halting the spread of AIDS and other sexually transmitted diseases.

As for real estate, Bruder's goal is to continue expanding Brookhill's turnaround capabilities, both with conventional and environmentally-tainted properties. "In that way," he says, "we make our own opportunities.