Monetizing Stalled Construction Deals
Published on November 7, 2021
Practical Solutions for Lenders & Investors
Fraud, incompetence, insufficient liquidity and delays due to a global pandemic are just some of the forces resulting in stalled real estate developments. Lenders and investors with capital tied up in these projects have common goals – complete construction, resolve any litigation, and monetize the asset through a sale, leasing and/or refinancing.
We have transformed millions of square feet of stalled residential, commercial and industrial construction projects into marketable assets for sale or occupancy through receiverships, out-of-court restructurings, ABCs and bankruptcies through the following process:
6 Steps to Monetizing Stalled Construction Projects
1. Determine the feasibility of completing construction vs. abandoning or selling project as-is:
- Secure and protect the property and associated business operations:
- Get control of finances, bank accounts, books & records, contracts and management offices
- Employ and manage security personnel
- Identify and extend all liability insurance including construction defect “Wrap Policy” protection
2. Identify, procure and manage financing requirements:
- Incremental construction financing
- Construction takeout mortgage financing
3. Review, amend and manage the design/construction team:
- Reestablish contracts with architect-of-record, other designers and drafting support
- Hire a third-party construction manager
- Identify and contract directly with all sub-contractors
4. Complete the construction project:
- Identify and resolve entitlement issues, permitting and easement requirements, construction setbacks, environmental approvals and land permitting violations
- Oversee general contractor through completion of project
- Employ third-party DRE attorney to prepare and modify required final tract maps, contracts, CC+Rs and disclosures
- Obtain final certificates of occupancy from cities and municipalities
5. Design and implement the sale or leasing process:
- Retain specialty sales or leasing team serving local market
- Design and prepare sales/leasing platform to market property
- Negotiate with any pre-existing buyers of residential properties
- Retain and manage title company
6. Manage finance and accounting:
- Prepare budgets, manage cash flow and track performance
- Pay vendors
- Process lien-related paperwork
- Coordinate sale and escrow financials
Representative Engagements
SEC Receivership – Residential Towers: 
Completing construction of 96-unit and 93-unit condominium towers in Northern California. When we took possession:
- The 96-unit and 93-unit towers were 50% and 70% complete, respectively;
- The contractor was out of business;
- No sub-contractors were working; and
- The properties required remediation for issues such as mold, ADA compliance and faulty construction.
We are completing construction and will begin marketing the units for sale soon.
Receivership – Industrial Building:
Completed construction of 200,000 square foot General Services Administration (GSA) security lab:
- Developer failed to complete building pursuant to contract;
- Helped resolve multi-million dollar dispute between lender and developer; and
- Completed construction of the state-of-the-art government lab facility.
Receivership – Track Home Development:
Completed construction of three large track home developments in Arizona and managed the sale of the homes:
- The home builder did not have sufficient capital to complete the developments;
- Managed all permit issues to enable completion of construction;
- Negotiated and cured outstanding debts to clear liens;
- Found and retained a contractor to complete construction; and
- Sold the homes in 8 months, with many selling for more than appraised value during a weak market, generating proceeds exceeding the lender’s expectations.
Receivership – Primary School:
Completed construction of a new, unoccupied primary school after the developing school’s charter was pulled, four months before completion:
- Obtained certificate of occupancy;
- Marketed the property for sale; and
- Maintained the property for two years until its $20 million sale to the local school district.
CRO / Consultant – General and Specialty Contractor:
- Managed weekly cash flow;
- Reviewed all project progress and completion milestones and assessed costs to complete;
- Reviewed litigation and risks for collection of receivables; and
- Reviewed bids for new work and borrowing base reporting.
For more information about our Stalled Construction and other Real Estate Solutions, contact:
David Kieffer
dkieffer@stapletoninc.com
213-235-0602