Distressed Assets

Philadelphia, 26 Buildings, Solvency Crisis

Danconia began managing this residential portfolio when it was about to go under:

Vendor Negotiation

Danconia rushed to make aggressive payment arrangement with utility companies and other key vendors. We broke outstanding bill payments into installments over a six month to a year period. We also achieved drastic reductions in vendor balances, such as a 30% decrease on a Home Depot account aggregate. Most significantly, Danconia negotiated a delay on payment of most utility charges till March. This three month window allowed Danconia to execute a massive rent collection, leasing, and rent increase project.

The Budget

To balance the budget, Danconia halted most external contracting jobs, and brought its own team to manage everything from unit renovations to otherwise expensive plumbing jobs.

Danconia also took over bill processing and paying functions in order to balance the budget on a micro-level and make all payment decisions. We conducted a portfolio cash flow study; a profitability analysis of each property; and an evaluation of expense and revenue goals for reaching solvency.

Spring in Philadelphia

By Spring, Danconia had achieved a 4% vacancy rate. We had structured payment plans and proceeded door-to-door to collect past due rent and monitor late payers. Danconia negotiated lease renewals and increased rents for most month-to-month tenants. Rent collection (including arrears) was consistently at 100% to 115% of rent roll.

Month by month, Danconia managed to successfully balance a very tight budget.

Winter Insurance Claim

During the following winter, a heavy snowstorm wreaked serious damages across the portfolio: Danconia seized this opportunity to file an insurance claim. We inspected the entire portfolio, collected detailed evidence of damage, and put together repair quotes provided by multiple companies. We hired an insurance adjustor and led an aggressive, months-long negotiation, ultimately obtaining in excess of 250K compensation for our investors.

This sum allowed Danconia to accomplish necessary roofing repairs and other much-needed capital improvements. The repairs were essential for the portfolio to successfully transition to a good, paying tenant base.

A Good Outlook

One and a half years since:

• The portfolio has cleared many of its outstanding vendor balances.
• New carpeting and other improvements strengthened tenant retention.
• Danconia’s on-site maintenance team aggressively treated work orders that were formerly chronic and unattended.
• Evictions were processed for over fifty delinquent tenants.
• Our management of accounts payable and receivable allowed for improved accuracy and effective asset analysis.
• We successfully leased out and refinanced a previously half-vacant building, bringing in $100,000 in for value-added improvements.

West Broadway: Lousy Commercial Tenants

Danconia entered the project at a time when this building’s five under-managed commercial tenants had ceased paying rent. To maintain the insolvent property, its owner routinely injected money to cover its expenses.

Rent Collection

Danconia began by performing a sustainability and profitability analysis. We proceeded negotiating with the commercial tenants, compelling them to sign leases in place of oral agreements. Pressured to get out or pay, all tenants resumed paying rent. Bringing expenses down and budgeting bill-payment allowed the property to finally become profitable.

Ashburton: Drug Dealers, Addicts, Squatters, and Prostitutes

Ashburton in Yonkers was a three buildings project. Two of these buildings were not collecting rent, had an undesirable tenant body, and were in dilapidated condition.

Recovery

Within several months, Danconia achieved the eviction of the entire tenancy of the two buildings in question. As the general contractor we worked with architects, and managed gut renovations on both properties during a period of six months. The renovations were financed in part by monies won by Danconia in a property damage insurance claim.

Disposition

Danconia worked with appraisers and brokers to realize the sale of both buildings. They were sold at a 100% increase over their appraised value before Danconia began the project.

West Broadway Rehabilitation

Danconia stepped into this project after the ownership of a small flood-damaged commercial building was declined insurance proceeds. Danconia worked with an adjuster, and won a $60,000 claim that covered all damage. That’s it: case closed.