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IRVINE, CA-Land brokerage specialist Park Place Partners Inc. has formed a new division called Park Place Partners Development Solutions that will provide analysis and solutions designed to determine the best course for lenders, investors and landowners to pursue in disposing of REO properties, deciding how best to proceed on stalled projects, securing entitlements and otherwise maximizing the value of their holdings. The new unit is headed by Damon Gascon, a former Inland Empire Area President of K. Hovnanian Homes Southern Coastal California Region, who has been named president of the new division.

Gascon tells GlobeSt.com that the new division, which will take on assignments throughout California, will focus on all classes of commercial and residential projects. The division sees four basic categories of clients that it will target in offering its services: commercial banks and other regulated financial institutions; nonregulated capital sources who have provided equity for land purchases or development projects; new investors in such deals who are willing to buy a troubled asset and hold it until the market returns; and landowners who wish to boost the value of a property through entitlements or other means because they recognize that there is not a market for their property as it sits today.

The range of services that the new unit is offering includes project assessment and analysis, financial analysis, risk mitigation, entitlement services to reposition or re-entitle a property, construction services and sales and marketing. Development Solutions is also ready to step into the receivership role if need be.

“There are a multitude of lenders that are out there right now that are going to be taking their projects back as REO, but they are not staffed for handling the REO,” Gascon tells GlobeSt.com. Those lenders are reluctant to add staff as these assets come back to them, so they are looking for knowledgeable real estate experts who can serve as an extension of their staffs to work through these REO projects, he adds.

The types of land holdings and projects that Park Place Partners Development Solutions will assist on could range from land loans to acquisition and development loans to construction loans on projects where the developer was unable to continue because of changes in market conditions that have undermined the viability of the project or the borrower’s capacity to operate within the conditions of the loan. Such situations lie beyond the ken of most lenders, Gascon explains.

When lenders take back a project, what they typically get back along with it is “a box of materials, all of them related to the development of that property,” Gascon says. Since many if not most of those materials will lie beyond the expertise of the lenders, they need someone who can go through that box of materials and tell them what they have and what they are missing.

“They need someone who can go out into the field and look at the project to give them an assessment of what needs to be done and prioritize those needs so that they can mitigate any further erosion in the value of their asset,” Gascon explains. The Development Solutions president says that with certain projects, the most sensible solution is to continue and complete it with the existing borrower in place if the lender can work that out with the borrower.

In other cases, the existing borrower will not be able to finish the project, so the lender will “need to put a few more dollars into it” to maximize return on capital by either leasing or selling the asset.

Another class of services that Development Solutions is offering has to do with securing sites and ensuring that they are safe in order to reduce the lender’s or new owner’s potential legal liabilities. “In some cases what we might need to do is immediately secure the site, wrap a fence around it and do whatever is necessary to maintain it in good standing with the local jurisdiction,” Gascon says.

He explains that when a project is abandoned, one of the first orders of business is to ensure that it doesn’t become a target of theft and vandalism that can render it an attractive nuisance that could be a liability for a new owner. Besides ensuring that the site is safe, the lender or new owner needs to ensure that the site complies with water and air quality regulations. Another concern is entitlements, which “can expire, and/or include triggers driven by time that could cost the new owner quite a bit of money,” Gascon says.

Development Solutions is already working on entitlements for a 325-acre project called Fleming Ranch in the newly incorporated Inland Empire city of Menifee in Riverside County that potentially could include 1,500 homes and a 40-acre mixed-use light industrial and retail business park along the 215 Freeway north and east of McCall Boulevard. The Development Solutions assignment includes obtaining approval of the specific plan, the environmental impact report and tentative tract maps for the project.

The new Park Place Partners division will work on a fee basis, negotiated on a project-by-project basis. “Each project will have a different level of requirements for services and staff,” Gascon says.

Development Solutions will identify the level of services and the personnel needs for each project, then it will negotiate either a flat fee, an hourly rate or some combination of the two. The fee structure is designed to provide flexibility because there are likely to be cases where “We will not be able to understand the scope of the project immediately, so we will need to develop the fee in a way that is comfortable for both parties,” Gascon says.

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