In evaluating construction options, several things have to take place in order to ensure that the banks/receivers are able to maximize what value is left in the property once taken over from the failed entity. 

In March of 2008, work on a partially completed 38-unit condominium project in the Korea Town section of Los Angeles came to a halt.  The Developer filed for bankruptcy and the court appointed the Douglas Wilson Company (DWC) as the receiver for the project with the task of completing the construction and managing the asset until the foreclosure took place.

As DWC spent several months trying to get the original contractor back on board to complete the work, the negotiations fell through.  Finding the right construction team was critical not only to protect the asset, but also to make sure the project was completed in a quality manner that would give the bank the most options after it was constructed.

After failed negotiations with the previous contractor, in December 2008, DWC hired Legacy Building Services to complete the construction.

For Legacy, approaching the construction completion of distressed properties begins with a 30-day due diligence process. This process thoroughly researches the status of existing subcontracts, insurance, materials stored on site, the subcontractor disputes and liens, the existing conditions, and develops an understanding of all of the other factors that could effect the timely completion of the project.  After the 30-day period, Legacy produces a written report that among other things details the path to completion along with a plan for resolving any liens, re-establishes any expired wrap insurance, and replaces necessary subcontractors. We also establish milestone dates for city inspection status, a schedule and estimated costs to bring the project to completion.

With Fedora, DWC took this due diligence report which was prepared by Legacy and obtained the banks approval to proceed with the project. Legacy began the physical construction in February of 2009. 

In this particular project there were many challenges in getting things started. Some of the most difficult and unforeseen challenges included a language barrier since most of the subcontractors, designers and the former owner were all Korean. Legacy also had to begin the task of establishing new relationships with the local City Inspectors and subcontracting community.  Thoroughly assessing the condition of the project was equally important and challenging since many of the building materials such as the drywall had been exposed to the elements for almost a full year. The permit also had to be transferred from the former contractor (who was hostile) in order to re-start construction.

After all of the challenges involved in completing the construction of this distressed property, Legacy is a general contractor that can stand by the end result of our work. Fedora was completed on-time and within our allocated budget. Trustee sale is imminent and both the bank and the receiver are pleased with the results.  The project is now move-in ready.

Legacy is a general contractor that understands the unique challenges that exist in distressed projects. The depth of experience of our staff, our ability to draw on our own internal development company, and our “whatever it takes” attitude carried the day. If you have a distressed asset or are looking at purchasing a distressed asset, call Legacy for a free consultation.