John Combs, founder of RiverRock, says that stabilizing troubledassets is "the most crucial step" for owners in today's economy. Hepoints out that RiverRock is already experienced in turningtroubled assets around. For example, the firm is managingresidential and commercial assets for receivers working in thehard-hit Inland Empire market, and its team has years of previousexperience working with distressed properties when the governmentformed the Resolution Trust Corp (RTC) to liquidate insolventassets of the savings and loan associations in the previouseconomic downturn.

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Combs and Gazzolo say that RiverRock is positioned to createstrategies for coping with the fallout from the current economiccrisis through the combination of the new Value Maximization unitand a services platform that already includes property management,construction management, project management, leasing andaccounting. Gazzolo points out that the combination of RiverRock'sexperience with distressed assets and its services offeringsenables the firm to tailor a strategy that best suits the specificasset.

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Gazzolo cites two examples of some properties for whichRiverRock is working on proposals right now. In one case, the ownerof a small office building valued at between $2 million and $3million is "facing foreclosure on the building and doesn't knowwhere to turn," Gazzolo says. The asset "has a lot of integrity,"but it needs some construction management in order to stabilize it,and it may need either an infusion of cash by someone who wouldpick up the note—or possibly a new buyer.

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In another case, the owner of a 100,000-sf office building islooking for help to become more competitive in a market wherevacancies of his competitors' buildings are in the single digitsbut his building is running between 14% and 18% vacant. Theownership has a good loan on the property but is not as aggressivein the marketplace as it could be and is not competitive on tenantimprovements, Gazzolo says.

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In both cases, the owners lack the expertise to solve theirproblems and lack the access to the types and quality of servicesthat they need to make their properties succeed. Regardless of whatultimately turn out to be the best courses of action for theseowners, Gazzolo says, "We are going to provide that small andmiddle-tier buyer with the same level of service as the moresophisticated institutional owners have come to expect, whether itbe the best bids on tenant improvements and constructionmanagement, the best leasing and marketing services or the bestadvisory services on how to investment structure the building,"Gazzolo says. "We want to be able to help these people reallyunderstand what the situation is and how to remedy it."

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Gazzolo, whose primary areas of expertise are office and retailproperties, notes that RiverRock plans to expand its ValueMaximization Unit soon with the addition of a multifamilyspecialist. Working with the other specialists at RiverRock, thenew team will be able to offer its services for everyone frommom-and-pop owners to institutional investors, according toGazzolo, whose experience includes posts at Cushman &Wakefield, CB Richard Ellis and Prudential Insurance Co.

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Combs founded RiverRock in August 2003 after serving as the headof Insignia ESG's property services division. His firm specializesin commercial, industrial and retail management of a West Coastportfolio totaling more than 8.5 million sf of space, operatingfrom its headquarters and seven other offices in SouthernCalifornia.

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Combs says that the new Value Maximization Unit will offermuch-needed services in the new era of economic uncertainty andtroubled capital markets that the commercial real estate industryis facing. "It's imperative that these new owners have access tonimble firms such as ours, led by real estate advisers who have adepth of experience in business cycles and real-world knowledge ofhow to turn around an asset, bring it to market and stabilize it,"the RiverRock founder states. "It 's not just a matter ofexpertise, but a depth of experience and the nimbleness to movequickly that is going to be important as the government and thereal estate industry deals with the real estate crisis athand."

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