Setting up a Distressed Asset Investment Fund

I have been approached many times to explain how a Distressed Asset Investment Fund is set up.  Clearly, you need legal advice and consultation every step of the way in this process, and the laws, disclosure requirements, and particulars of each Fund will be different, but in general, below is a Legal Guide that I published on the website http://www.avvo.com, which is a site that gives consumers guidance, background information, including ratings in their selection of an attorney.  While this Legal Guide is meant to be educational and informative, it is posted for informational purposes only and discusses general legal principles, trends, and considerations; it is not intended as specific legal advice .  This post does not establish an attorney client relationship.  For legal advice, you should retain legal counsel in your state for advice regarding your specific circumstances:

That being said . . . Assets have become distressed due to above-average vacancy rates, inability to refinance existing debt, depletion of reserves, and disrepair. While these assets are now more affordable, the capital funding needed to acquire, rehabilitate and reposition these assets is more difficult to obtain.  The following are the basic steps and principles involved in the set-up of a Distressed Asset Investment Fund. Continue reading

4th and 2

This is not a sports blog, but I couldn’t resist. 

For the past 2 days, I have heard many different points of view on Bill Belicheck’s decision to go for it on 4th and 2 against the Colts on Sunday night.  A lot of the comments were decidedly negative, some were plainly idiotic.  The positive comments seemed to focus on defending Belicheck because of the good calls that he has made in the past.  This, however, infers that the call he made was wrong.  Not so, he made the right call.  

Given the circumstances that he was facing at that particular point in the game, he decided to put the ball in the hands of his trusted quarterback, indisputably one of the greatest clutch players the NFL has known.  It’s not a bad call simply because it didn’t turn out like he hoped.  It was the right call, it just didn’t get the result we wanted. 

That call, however, has worked out many times before, including earlier this season against Atlanta when it was credited for 16-10 win.  In fact, Belicheck has been successful 76% of the time when making that call.   

That’s exactly the kind of management that differentiates an organization, and more than ever in this economy, it’s the kind of decisive leadership that organizations need.  In any event, you can’t go from being a genius and a football hero to a goat overnight based upon one call. 

Although there are overwhelming positives of our digital world, this instant gratification society, with its short memory span, and unforgiving nature is not one of them.  We have so many blockheads that have been elected to Congress and are deciding on our health insurance policies, the bailouts of banks, our energy policy, and our management of sensitive global and domestic issues.  We have other blockheads that were (and some that still are) running big banks, major car companies, Wall Street investment houses, some of whom made terrible decisions, were indecisive, or just plain stupid. 

Bill Belicheck considered the totality of the circumstances, and went for it, he put it all on the line, and gave his team the best chance to win, it just didn’t work this time! 

Still, I would rather have a smart, analytical, decisive leader like him making decisions for me than some of these others that I see on the nightly news.

Transactions with Elements of Environmental Remediation To Become More Prevalent

As developers continue to realize that developable land is fast becoming a scare commodity, it will become more necessary to re-develop sites once home to industries that have long been dormant in our current economy, such as cotton mills, tanneries, leather producers, metal finishing, storage and smelting plants, rope manufacturers, and textile mills, to name a few.  Accordingly, environmental remediation will become a more necessary and crucial development consideration. 

 Accordingly, I would like to highland one of our recent transactions:

 

ANNOUNCEMENT OF SUCCESSFUL TAX CREDIT AWARD AND SYNDICATION

Needham, Massachusetts, October 26, 2009

Warren A. Kirshenbaum, Esq. and the Cherrytree Group, LLC are pleased to announce their successful representation of two (2) Massachusetts Realty Trusts for whom they secured a large tax credit award of 2009 Massachusetts Brownfields Tax Credits (the “Tax Credits”), and then facilitated and closed on the sale of these Tax Credits to a Tax Credit Syndicator.

Brownfields Tax Credits are issued by the Commonwealth of Massachusetts to developers who have successfully remediated environmentally contaminated sites. The tax credits are issued as a percentage of the developer’s costs incurred in the environmental cleanup of the site. We congratulate our clients for their successful remediation and development of these environmentally damaged sites, located in important development areas in the Commonwealth of Massachusetts.

If you have any questions about commercial real estate, development financing, or tax credit transactions, please feel free to contact Warren directly at 781-239-8900 or wkirshenbaum@oarlawyers.com.

Warren A. Kirshenbaum,    Esq. 

Cherrytree Group, LLC

● 160 Gould Street, Needham, Massachusetts 02494-2300 ● Tel: 781-239-8900 ● Fax: 781-239-8909 ● WEB: http://www.oarlawyers.com ● BLOG: https://distressedassets.wordpress.com

The Ibanez decision and the foreclosure business

Foreclosure Sign

Last week, in a Massachusetts Land Court decision, Judge Long issued a Memorandum and Order denying the motions to vacate the previous judgments that he had entered in the consolidated cases of U.S. Bank National Association v. Ibanez and Wells Fargo Bank v. Larace (both referred to hereinafter as the “Ibanez” decision).  Effectively, Judge Long thereby reaffirmed his earlier decision in Ibanez, which invalidated the foreclosure sales because the foreclosing entities were not the mortgage holders “at the time” of the foreclosure, nor did they have a valid assignment of the mortgage pursuant to Massachusetts law.  Judge Long rejected the banking industry’s arguments in favor of a strict construction of the requirements that need to be followed by a foreclosing party under M.G.L. c. 244 Section 14 (hereinafter referred to as the “Massachusetts Foreclosure Procedure Act”).  The banking industry had argued that (1) “post-sale mortgage assignments to the successful bidder, even if backdated should suffice”, (2) that the foreclosing entities should be “statutorily deemed to be the “present holder” of the mortgage” because they possessed the note, a blank mortgage assignment, and a series of off-record assignments by which they were entitled to a mortgage assignment in recordable form”, and (3) that the foreclosures initiated by the foreclosing entities were “valid because they were done at the direction of the actual mortgage holder.”

To understand the industry ramifications the Ibanez decision may have, a detailed look at the facts and issues of the case is necessary.  

Although there were several issues under consideration in Ibanez, the primary and most important issue  was whether the foreclosing entities had “the right . . . to foreclose the subject mortgage in light of the fact that the assignment of the foreclosed mortgage . . . was not executed or recorded until after the exercise of the power of sale.”

It had become common in the mortgage industry, that in order to create the volume in the money supply that the market was demanding, mortgage loans were sold into a trust, packaged into pools based upon their credit quality, and then syndicated to qualified investors in a private or public offering underwritten by Wall Street banks. 

This is precisely the situation that occurred in Ibanez.  Continue reading

A year in the life . . .

wall street

It’s been about a year since the meltdown on Wall Street, and it’s good to hear that Ben Bernanke thinks the recession is over. 

I believe that much has been done, and that the steps taken have been positive, but it’s not over by a long shot.  Yes, necessary things have been done to stabilize the economy so that we are now just in a recession as opposed to the “Great Recession”, and it appears that what has been done by governmental design is to shore up, capitalize, and stabilize the banking system.  Although that has left distaste in the mouths of many, it seems to have been a baby and bathwater bailout. 

Nevertheless, let’s not kid ourselves, the fundamentals that led to the “Great Recession” are still with us, and the statistics that are giving us hope are somewhat misleading at the present time.  Continue reading

We need their strength

It may be hard to digest, but if you read the tea leaves, the financial titans and intellectual powerhouses that served in both the Bush Administration and now serve in the Obama Administration may have approached the resolution of our economic issues differently but they seem have reached the same conclusion. We need Wall Street to be strong; New York needs to remain the financial capital of the world. Continue reading

There’s no Coup de Ville at the bottom of this Crackerjack Box

Upon the application of certain secured bondholders, including a group of Indiana pension and construction funds that hold Chrysler bonds, the US Supreme Court, by Judge Ruth Bader-Ginsburg, ordered a stay of the sale of Chrysler’s assets to Fiat. Judge Ginsberg’s ruling delays the sale while the Court decides whether it will actually hear the appeal by the bondholders. The bondholders, who are being crammed down into accepting a deep discount on their secured debt are opposing the sale of Chrysler’s assets to Fiat. As part of their opposition to the deal, these secured bondholders have raised an intriguing question in that they ask whether the executive branch of the US Government has exceeded its constitutional jurisdiction in acting to back the Chrysler/Fiat deal under the guise of Congress’ authority granted by ARRA (American Reinvestment and Recovery Act) and TARP (Troubled Asset Relief Plan). While this bailout legislation was initially enacted as a mechanism to inject capital into a financial system that had seen financial institutions effectively shut down their lending capabilities due to the extreme write-downs that mark-to-market accounting rules had on their capital reserves, it was soon called upon to perform other functions. Nevertheless, the bondholders argue that the bailout legislation that has given the Federal Government its expansive authority was designed to aid the financial and banking sector in an attempt to thaw the credit crunch, not as a means for the Federal Government to broker, finance and sheperd a deal for an automaker using the Federal Bankruptcy laws to shed its intolerable debt and unwieldy operating cost structure. The investors in these Indiana funds are teachers, firefighters, and other such Main Street people that loaned their money to Chrysler and were issued secured bonds. The President has stated that these bondholders should accepted the diluted payment being offered to them, that is, to essentially take a sucker-punch for the good of the team. The White House intends to accomplish this underpayment by using the very same bailout legislation that, only a few months ago overpaid AIG employees and repaid Goldman Sachs’ AIG market risk. Is this the way the law was intended to be applied? Can we manipulate our constitution in this way? The answer is yes, most likely we can. Continue reading