Tribune: Specialists Pick Up Pieces of Real Estate Market

May 4th, 2011 | by ashley gordon |

Picking up the pieces of the shattered real estate industry is accelerating in the Chicago area.

Survivors of the drastic downturn have devised new ways to sell the massive inventory of foreclosures and unsold new homes in the city and suburbs.

Call them workout kings, because they are striving to work out the backlog of failed real estate deals from the boom years.

Their strategies vary widely:

They create online listings to sell nationally.

They work for banks to make condo buildings more salable.

They specialize in auctions.

They buy distressed properties and fix them up for resale.

About half of all housing sales in the Chicago area are distressed properties. That is the potential gold the workout kings are mining. Workouts benefit many in real estate: buyers, sellers, municipalities, banks and, of course, the workout kings.

“Everybody wants a workout, but everybody wants to keep it a secret,” said Keith Lord, president and managing partner of Lord Financial Advisors in Chicago.

The secrecy, in part, is dictated by banks that dont want to reveal the extent of their distressed real estate assets, Lord explained.

His firm operates a database focused on helping small- and medium-size banks market distressed properties. Some 200 Chicago-area properties are listed on the database, ranging from a 397-acre horse farm and estate in Barrington Hills (loan balance, $14.5 million) to two spacious units on the 14th floor of a Chicago condo (loan balance, $3.2 million).

“Its a high-tech way to sell, and we average 75 percent of the asking price for residential properties,” said Lord, whose firm has been nicknamed the “Lords of the Workouts.”

He estimates it will take three to five years to complete workouts in the real estate industry. “Right now were just at the 30-yard line nationally,” he said.

“Banks are desperate to get rid of their failed real estate assets,” said real estate analyst Steve Hovany, president of Strategy Planning Associates in Schaumburg.

He predicts a massive workout will be required to fix the suburban housing market.

“Any of the projects approved between 2004 and 2007 will have to be revised,” he said. “Houses during that period were too big and too expensive. Todays market requires homes that sell for 25 to 30 percent less.”

Helping banks prepare distressed multifamily projects for sale is the focus of Catapult Real Estate Solutions, based in Chicago.

Financial Solutions