We support clients that need to: improve their executive, staff, investment and development teams; insert interim CRO and/or CFO expertise into an organization; and/or identify strategic and alliance partners in local and foreign markets, which includes coalescing expertise for Public Private Partnerships.
Real Estate:
We have experienced more than one recession as a real estate search consultancy; late 1989 to late 1994 were years of hardship for any profession that serviced the commercial real estate industry. Rutherford International was new, and we adjusted to this lengthy recession by staffing financial service companies with mortgage valuation and restructuring experts; leasing executives that understood blend/extend strategy; and property managers that understood tenant retention and the importance of “Net Operating Income.”
This credit crisis in Canada is much different than in the United States; conventional commercial mortgage lenders in Canada (with the exception of certain strained markets) are not convinced that they will see any significant increase in their “Special Loan” files.
We have approximately 2000 individuals in our resume files who claim to have expertise in real estate repositioning and workout, so we decided to find out if there would be a requirement for this skill set by surveying the lending community. Surprisingly, the consensus is that we are six months ahead of ourselves in terms of demand for a clearinghouse of experts with this kind of experience.
Current interest rates and deep pocketed ownership are the primary reasons for this perspective; however we’re not convinced that the industry can sit in sublime isolation, inattentive from what’s going on within the commercial real estate world. Real estate may be local, but Canada sits at the wrong end of the global supply chain. The lender’s primary concern is the cost of long-term capital in thirty months or less as the international capacity to borrow reaches its limits, and global capital begins to flow to the highest interest unhindered by national borders.
Expertise in mortgage workout is not in high demand as of yet; however knowledge in stabilizing values through operations and leasing will more likely be a requirement at the ownership level; REITs with limited cash reserves, dispositions and erosion of unit values will undergo stress. As well, the restructuring of real estate service companies (particularly those focused on transaction and development) along with home builders and owners of retail and industrial property in tertiary markets will have need of legal services, and perhaps a renewal of their executive team.
The “Denominator Effect” – as it pertains to the fall in equity portfolio value relative to real estate portfolio value – has destabilized the traditional asset weighting in investment portfolios. This appears to have constrained the domestic real estate investment activities of the major private pension funds. Some funds may consider a disposition of non-strategic elements in their portfolio as a means to re-balance their asset weighting.
The concurrent impact of face rate erosion; and social movement for environmentally efficient structures or the “Green Effect” will have a dual impact on asset retention decisions. The erosion of face rates may no longer justify the capital reinvestment to achieve a LEED’s standard, especially institutions that are driven by investment yield.
Life cycle obsolescence is a little known but important element of consideration when “buy and hold” portfolio strategists conduct their acquisition and disposition due-diligence. In the mid-1990’s, experts in the revaluation of commercial real estate claimed that more than fifty percent of Manhattan’s commercial real estate stock (much owned by pension funds) was reaching technical obsolesce. Most large American cities continue to face this same reality. I would expect assets that are reaching the limits of their life cycle and are slated for re-valuation to a LEEDS standard are ripe for acquisition by private equity funds and deep-pocketed interests.
In key markets throughout North America, erosion of commercial property values in this down cycle, combined with the need to revalue mid-life-cycle assets to a LEED’s standard offers a unique opportunity for the application of existing, and the aggregation of opportunistic capital into debt and equity funds.
Rutherford International has the ability to bring together the expertise for staffing and/or creating these funds. For further information on our real estate search services, please contact Forbes Rutherford.
Infrastructure and Public Private Partnerships:
Faced with increasing deficits, eroding tax revenues and concern over legal liability associated with catastrophic failure, governments have acquired a renewed sense of appreciation for the private sector role in delivering services and infrastructure to the public domain.
When we consider what’s happening in the United States, clearly Public Private Partnership has an important role to play in this current economic maelstrom we’re facing.
“US GDP contracted at an annualized rate of 6.1 percent during the first quarter, little improvement on the 6.3 percent fall in the last three months of 2008. US exports fell by 30 percent, the US Commerce Department reported. New US business investment, normally made when companies are planning production increases, tumbled by a record 37.9 percent in the first quarter. US capacity utilization is at a rock bottom 69.3 percent. In real economic terms, this amounts to almost one-third of all plants standing idle. The number of US jobs has fallen by 3.9 percent, exceeding the 3.2 percent decline in the 1981-82 recessions. The 15.4 percent fall in US industrial production is worse than in previous recessions.”
Bill Buckler, Privateer Economic Newsletter - May/09
Bill Buckler, Privateer Economic Newsletter - May/09
"Public Private Partnerships and economic stimulus have become synonymous."
Rutherford International has access to a network of analysts and experts with experience in PPP endeavors throughout the industrialized world. We can help you structure your PPP initiative; or staff an existing project. For more information, contact Forbes Rutherford
Corporate Restructuring and Insolvency
There was a time when a country’s success was measured by the hard goods it produced, however “off-shoring”, “near-shoring”, predatory pricing, uncompetitive taxation, knowledge deficit, succession challenges and a cultural ethos of “entitlement” compounded by a malaise in visionary leadership to re-invest has all but contributed to the hollowing-out of key sectors in North America’s manufacturing industry
For example, California, Eastern Seaboard and Great Lake States and Province’s ignored the needs of their manufacturers – consumerism drove public policy - construction and rising home values were a Kafkaesque masquerade for economic vitality. “One can not build a sustainable economy on a housing boom” - that is the essential truism re-learned - the dislocation associated with the de-leveraging of the sub-prime and prime mortgage industry simply punctuates this tenet. Historically, "real estate has followed economic cycles not led the forefront"; however I believe it would be fair to suggest that this fundamental truism was lost on public policy makers during these past three years.
In all industry sectors, the business of business is in need of serious and sober introspection; governments need to set the rules and step aside. Manufacturing risk should be rewarded even celebrated; real risk and not contrived failure easily forgiven. These are fragile times – companies will restructure – industry sectors will consolidate – those who are resilient and agile will lead our economic recovery.
It’s during a recession that one prepares for recovery – this is the optimum time for Stakeholders to tweak their executive and managerial teams. I have a growing list of “Chief Restructuring Officers” and “Chief Financial Officers” that we are able to insert into and be effective immediately in a broad range of industry sectors.
Rutherford International has access to an international network of full-time and interim “Turnaround” executives. We would welcome the opportunity to assist you on files where this type of interim or permanent executive requirement is needed. We'll even leave a portion of our fee on the table in return for "prefs" or "warrants." For more information or to be considered for membership within our network of "turnaround" executives, please contact Forbes Rutherford.
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