Single Family Residential Developer

Transaction Type: Restructuring
Industry: Real Estate
Location: Southeast United States
Client: Owner
Role: Financial Advisor

Our client is a large developer of single family housing in Florida. At the time we started the assignment, the company employed over 120 people and had been actively developing 10 separate projects. Each project was unique, each having its own set of attributes, challenges and opportunities. Over $200,000,000 in A&D loans (Acquisition and Development) were associated with these projects when the residential market came to a standstill in mid-2008. There were also over 300 completed and unsold homes scattered amongst these various projects.

Cascade commenced its engagement with the company by performing an exhaustive project-by-project analysis for the client and the banks. Comparable market pricing for new homes, economic trends, absorption analysis, marketing programs, overhead expense, and carrying costs were analyzed, among other variables. A robust financial model was prepared which was then used to communicate the realities of the situation to the banks and to monitor the financial situation for the client.

We were able to negotiate an out-of-court restructuring of the client and its borrowing relationships that had the following key elements:

  1. Deeds in lieu were given on several properties before year-end 2008. This generated tax losses that resulted in tax refunds of $4,500,000. The borrower agreed to invest this refund back into the company to fund overhead for 2 years.
  2. Banks agreed to new release pricing for the lots and new homes in order to generate sales volume.
  3. Land held for development or re-sale was written down to current value.
  4. Company was downsized to fit current and expected sales and development volume.
  5. Guarantees restructured to a “bad-boy” guarantee once the principal invested a certain amount of additional personal capital into the business.

These steps were taken to achieve the maximum possible recovery for the banks and also allowed the company to continue as a developer without the taint of a bankruptcy.