Workout group aids foreign investors here.

Workout group aids foreign investors here

Four workout specialists have joined together to service foreign and other investors with troubled U.S. real estate.

Andrew Garr, Stephen Mann, Jordan Saper and Robert Kligerman have experience in the workouts of over $5 billion in troubled properties including the 5.5 million square foot Berisford portfolio. Together they have formed Clifford/Millennium Properties.

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Real estate attorney, property manager and workout specialist Garr has run Millennium III Real Estate Corporation for 10 years. He has known Mann, counsel to Mudge Rose Guthrie Alexander & Ferdon, and a real estate asset manager, for over 20 years. About five years ago, they worked on a deal together and realized their professional lives were going in the same direction. Mann had been working as Clifford Management with developer and leasing expert Saper on the Berisford workout, and also with Kligerman, an experienced leasing professional, on Blue Hill Plaza, an office complex and part of the Berisford portfolio. Kligerman was a senior executive at Cross and Brown and had been in the leasing business for 17 years in Manhattan.

Early this past summer, the four said they realized that even with the large number of workout specialists, there was no fully integrated company which would completely service foreign interests whose borrowers or partners were in financial trouble.

Garr said these investors needed to hire someone to work with local banks as well as someone to work with management and act as liasion with attorneys. "If you read our resumes, we can handle a very complicated workout of real estate assets, represent our clients in all negotiations - keep 40 bankers in one room in line, for instance - manage the assets ourselves or manage with the existing staff," he said. "Between us, we do heavy construction, light construction, and manage property from Santa Fe to upstate New York."

"We cover a good chunk of the country," Garr noted, "with properties in 15 different states. If we combine all of our ownership, management and asset management interests, it would be close to 10 million square feet."

Some of the properties include: 14 Wall Street (Bankers' Trust), III Broadway, 115 Broadway, William Street, 286 Madison, 290-292 Madison and Blue Hill Plaza in Pearl River, New York.

Mann said the group often acts in the same role as an inside general counsel would perform. "We get involved in all aspects of strategy, he said, including dealing with the partners.

"Most foreigners have complicated joint venture partnership, and need help," he said. While he acknowledges a lot of people can do workouts, Mann said, they have discovered that foreign clients need more than that. "We must get down to the nuts and bolts, he said.

"We act as asset managers and if the owner is not experienced, we can act as their alter ego," Mann explained. They will act as go-between with lenders management, tenants bankruptcy courts and other counsel. The properties are both self-managed and managed by them or others. "We provide owner management to those properties which are in trouble, including leasing," he said. "There is no other group a foreign company can also handle all aspects of the overall workout."

Clifford Management is very strong in commercial leasing and office management, Garr said. "Steve did one of the largest workouts in real estate history, n he noted, pointing to the $1 billion Berisford deal. "I've done as many workouts but haven't had as many zeros." Garr has worked on deals up to $25-million and did $100 million in condominium conversions in New York State. He is also involved in both shopping center and residential management, including construction management and building improvements.

"While I think our service is extraordinarily useful for a foreigner," Garr noted, "it can also be useful to others in the United States whether they are a group of limited partners or a small insurance company which has a small position in a portfolio."

"The fact that we manage," Mann said, "means we can also better utilize the skills of other people when the properties are managed by third parties." They are all believers in on-site owner management when possible.

The group maintains an office at properties they manage at Blue Hills and two offices in Manhattan, with one at 286 Madison. "Our goal is to be so successful that we are always working ourselves out of one of our offices by leasing them to new tenants," Saper added.

During the last six months at Blue Hill, a 1.2 million square foot office complex 10 miles north of the George Washington Bridge in Rockland County, they leased over 250,000 square feet and have brought it to 90 percent occupancy. Historically, they said, the property had a stigma due to marketing problems. "During the mid-80's, it enjoyed a renaissance and was a great success but recently deteriorated again," Kligerman said. "Berisford had an interest in the property and we negotiated with the lender to modify the debt and we took over control of the property.

The company moved its offices right into the 250 acre property. Many of the tenants were fed up with the past management and ready to exercise termination clauses, Kligerman added. Indeed, within a week of moving on site, three or four termination letters were received by the undaunted group. Blue Hill is the largest building between 60th Street and Albany, Kligerman said, and contains corporated offices such as Met Life, Allstate, AT&T, the Federal Reserve, Federal Express, NYNEX, and Orange and Rockland County utilities.

The tenants felt neglected by management, he explained, but with new management on site, and a lot of hand-holding and changes, none of the tenants ended up terminating their leases and many have now renewed. Some changes were made in small but significant ways. "The uniformed employees now have a different attitude, and since the cafeteria was not up to par, we took over control directly and brought in a top flight team to run it," Saper said.

Between the four, they have many contacts, Mann explained, in all aspects of real estate development and management.

"Most of the people stuck with troubled real estate want to sell," Garr noted, and he believes part of a meaningful solution for troubled properties is the skill to find new funds as an alternative. "For one building we are currently negotiating a joint venture with someone to put in new money," he said.

Mann said the largest source of money for these properties are the owners or existing foreign lenders but it is hard to know when to draw the line. The first question which their clients ask, Mann said, is, |Should we put more money in?' "We have to do a sophisticated analysis on a return on capital," he explained. Sometimes they just have to tell the owner to sell, to give it to the lender or to convince the lender to make some of the cash flow available to maintain the property.

One thing which distinguishes this group in today's market, Saper said, is that a big institution tends to be cumbersome and properties need "massive" amounts of attention. "We are a lean, motivated, hungry group who control a billion dollars worth of property," Saper noted. "We've negotiated a billion dollars worth of debt and the lenders which started out as our adversaries, today are our references."

Of the Berisford Properties' 5.5 million square feet, some was sold and some given to lenders while the rest, including Blue Hill, was retained with restructured loans to be operated by Saper and Mann.

"What's terrific about this from my point of view," Kligerman said, "is that we have a full view of real estate. It's not myopic because we have total integration. The benefit as leasing broker is that I have guys right in my home office, right next to me, and we can bounce problems back and forth completely from an owner's or a lender's view."

PHOTO : Andrew Garr, Stephen Mann, Jordan Saper, all from Clifford/Millennium Properties. The fourth member of the Clifford/Millennium team, Robert Kligerman, is not pictured, as he suffers from vertigo.