So much of dealing with distressed commercial real estate is an “out of the box” experience. But my use of the phrase “out of the box” is extremely nuanced:
- change your thinking; and
- change the box (the property), too.
Here’s an approach that goes out of box and then reverses field to “remake” the box – Bob Burton at Common Interest 360 has an interesting thought for increasing the value of under-valued improved real property, whether ownership still is with the borrower or is with the lender (or servicer) after a foreclosure or deed-in-lieu of foreclosure:
- investigate the merits in converting the property into a condominium structure
Sure, this approach is tied to:
- local demand for specific uses
- the physical andor operational attributes of the property, and
- it probably includes spending money to make changes to the property itself or to building services (such as HVAC, etc.)
So, this “out of the box” by “remaking the box” requires some creativity. But, what’s “new” about creativity in dealing with distressed commercial real estate? However, if parts of the property could be put to a different use (turning it into a “mixed use” project), yet these parts share basic structural components or building services, then it is simply smart to consider a condominium structure. For example, if there is a demand for traditional office or medical office, could the second story retail, or the rear of the shopping center be converted into those uses; and would converting ownership of that area be more valuable if it was a separate ownership structure? In other words, make these areas into a “medical office building” but clothed as a separate condominium unit; with the balance of the project being a separate retail condominium. Create a condominium structure with two units: retail unit; and a medical office unit. The result could be new value – indeed, a present of sorts. Take a look at your property. Then wander over to Common Interest 360, and consider subscribing to it. Kudos to Bob. He gets it. If you have any comments or questions, please do so below.