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NEWPORT BEACH, CA-The real estate industry faces a shortage of adequately experienced turn-around executives and receivers to cope with the tremendous number of anticipated defaults, a veteran real estate receiver says. Taylor B. Grant, who was a participant in the recent RealShare Distressed Assets conference in Dallas, notes that with about $2 trillion of commercial real estate loans held by 8,300 banks, and with about $264 billion of those loans maturing this year and $245 billion due in 2010, it is not unreasonable to expect about 5% to 7% to go in default.

The receivership business will only increase in the next two years, Grant says. The reason: Banks are increasingly turning to receivers because this mechanism protects them from myriad claims and administrative and operational requirements that come with projects in default. He also notes that astute receivers can frequently control the asset versus exposing the lender to a long bankruptcy period or the liabilities associated with being on title.

Grant, who has been appointed by the court as a receiver for Bank of America and GMAC ResCap on 36 properties on which developers have defaulted, is a former developer of numerous commercial and residential projects. “This kind of hands-on experience is critical for advising lenders,” he observes.

Lenders also turn to receivers for a host of other benefits, according to Grant. For example, receivers can immediately control the assets versus exposing the bank to a long bankruptcy period, they can advise lenders on the viability of turn-around or disposition strategies for distressed properties and they have the expertise to implement either action. They also can interface with tenants in commercial properties or homeowner associations at condos, something lenders are loathe to do as a result of legal implications.

“It is also critically important that lenders be aware of a receiver’s conflict of interests,” Grant adds. “We assiduously avoid conflicts of interest by not acting as brokers, property managers or contractors even though we have deep experience in each of these areas,” he says. He notes that his independent operating company, California Real Estate Receiverships, has no stake in vendor companies.

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