Industries

Real Estate

The rise of both commercial and residential property values has buoyed real estate owners and managers since the financial crisis, but with the economic expansion now over a decade old, the next credit cycle turnover will shake out the winners from the losers in this sector. Companies who relied on debt and leverage to finance deals may find themselves needing to clean up their balance sheet or make strategic decisions on whether to keep or sell key assets.

Real estate firms need a plan to survive the next economic downturn. See how SCP’s veteran financial and operational restructuring experts can help.

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Case Studies

Real Estate Industry Team Members

Christian Sorensen

Senior Director

Philip Kaestle

Managing Director

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Christian Sorensen

Senior Director

BiographyNotable Assignments

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Industry Expertise

Christian Sorensen, a Senior Director at SierraConstellation Partners, provides operational and financial restructuring and advisory services to both underperforming companies and companies in transition. He has experience with in- and out-of-court restructurings, operational turnarounds/improvement, balance sheet restructurings, debt and equity capital raising, mergers and acquisitions, divestitures, and conducting financial modeling and forecasting.

Christian has experience in a variety of industry verticals, including: aerospace and defense; agriculture; automotive; business services; consumer; food and beverage; healthcare; gaming, lodging and leisure; industrial and manufacturing; media and entertainment; oil and gas; restaurants; retail; technology; and transportation and logistics.

Prior to joining SCP, Christian worked at Sun Capital Partners, an operationally-focused middle-market private equity firm that invests in companies that are operationally challenged, experiencing an industry or business transition, undergoing a corporate divestiture, or managing rapid growth, with over $9 billion of capital under management. At Sun Capital Partners, Christian focused on analyzing control equity investment and divestiture transactions, and actively worked with executive management teams to drive performance improvement of portfolio companies. Prior to Sun Capital Partners, Christian worked at the investment bank Imperial Capital, where he focused on restructuring, financing, and M&A transactions.

In 2019, Christian won the M&A Advisor’s Annual Turnaround Award for Restructuring of the Year of between $25-$50 million for his work with the Cranberry Growers Cooperative.

In 2021, Christian received the M&A Advisor’s Emerging Leader Award, which recognizes leading M&A, financial and turnaround professionals who have reached a significant level of success while still under the age of 40.

Christian holds an Honors Business Administration degree from the Richard Ivey School of Business at the University of Western Ontario, where he graduated with Distinction.

  • Financial advisor and part of team that served as Chief Restructuring Officer to cooperative of cranberry growers, which successfully implemented a Chapter 11 Plan of Reorganization. SCP's solutions identified and implemented operational changes to reduce costs by over 20% and improve production yields by over 10%, while providing secured lenders full recovery. The transaction also received a Turnaround Award by The M&A Advisor for restructuring of the year.
  • Financial advisor and part of team that served as Chief Restructuring Officer to agriculture and commodities company during its Chapter 11 bankruptcy restructuring. Executed an orderly sale of all inventory, monetized certain contract assets, and sold individual operating facilities via court-approved Section 363 asset sales to maximize recoveries.
  • Financial advisor to consumer packaging business with over $140 million of indebtedness following events of default. Developed and implemented cash management solution, identified operational changes to reduce working capital accounts and increase cash conversion, and provided strategic review of alternatives.
  • Financial advisor to diversified manufacturing company with prior year revenue of over $700 million, including developing plant idling plans and identifying and implementing operations changes to reduce quarterly cash burn by over $5.0 million, while achieving a successful refinancing.
  • Worked with leading global manufacturing company on key operational enhancement initiatives to generate over $30 million of EBITDA improvement, and sell non-core assets.
  • Led approximate $100 million acquisition of North American manufacturing company. Worked with executive management teams to identify cost savings and synergies across various departments to enhance EBITDA by approximately 50%.
  • Evaluated in- and out-of-court restructuring alternatives to maximize shareholder value for an aerospace company. Negotiated senior debt purchase, and subsequent stalking horse purchase agreement and credit bid in a Chapter 11 §363 asset sale.
  • Closed over $7.0 billion of restructuring, financing and M&A transactions.
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Philip Kaestle

Managing Director

BiographyNotable Assignments

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Industry Expertise

Philip Kaestle is a Managing Director at SierraConstellation Partners where he provides financial and operational advisory services to companies in transition. He has experience with balance sheet restructurings, interim executive management, operational turnarounds, identifying strategic opportunities, debt and equity capital raising, mergers and acquisitions, financial modeling and forecasting. Philip has worked in a variety of industries, including aerospace, apparel, distribution, entertainment, financial services, food and beverage, healthcare, industrial services, manufacturing, marketing, media, real estate and retail.

Philip has served in a variety of senior-level positions including Interim President, Chief Restructuring Officer, Interim Chief Financial Officer, Liquidating Trustee, Financial Advisor and Investment Banker to numerous middle-market companies and is particularly skilled at assisting clients through challenging situations.

Prior to joining SCP, Philip was an associate vice president in OneWest Bank’s Media and Entertainment Finance Group where he was responsible for structuring, underwriting and executing new senior debt transactions and recapitalizations for media and entertainment companies. He was also a senior financial analyst in OneWest Bank’s Commercial Real Estate Group, responsible for managing and liquidating non-performing real estate assets.

Before joining OneWest Bank, Philip was an associate at Arch Bay Capital, a Southern California-based real estate investment fund. He started his career as an investment banking analyst with Imperial Capital, LLC in Los Angeles.

In 2020, Philip received the M&A Advisor’s Emerging Leader Award, which recognizes leading M&A, financial and turnaround professionals who have reached a significant level of success while still under the age of 40. In 2022, Philip was named to the Turnaround Management Association Northwest Chapter Board of Directors.

Philip holds a Bachelor’s degree in Financial Economics from Claremont McKenna College and is one of the co-leaders of the Claremont McKenna College Seattle Alumni Chapter.

  • Liquidating Trustee and Chief Restructuring Officer to a distributor of alcoholic and non-alcoholic beverages where he raised senior debt through a refinancing of the company’s credit facility, then sold the assets of the company through a competitive process and completed the wind down despite ongoing litigation between the two shareholders.
  • Interim President and Chief Financial Officer to a dental laboratory manufacturing company where he rebuilt management and finance teams and significantly reduced operating expenses through a series of strategic initiatives despite a volatile operating environment.
  • Chief Restructuring Officer to a clinical-stage biopharmaceutical company which filed for Chapter 11 as a lawsuit with a former co-development partner was coming to a head. SCP led a settlement negotiation to resolve the litigation and is in the process of effectuating an orderly wind down of the business, which has already resulted in full repayment to the pre and post-petition lenders.
  • Chief Restructuring Officer and Interim Chief Financial Officer to a color marketing manufacturing company where he executed a series of cost reductions and operational improvements to increase profitability despite a challenging operating environment. He also assisted with the sale of the company, resulting in full repayment to the senior lender.
  • Chief Restructuring Officer and Interim Chief Financial Officer to an ethnic grocery store chain. Key responsibilities included cost reductions, vendor relations and cash management. He implemented a $12 million restructuring within a three-month timeframe which stabilized the business and allowed for a sale and subsequent recapitalization.
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Confidential Family Office

Situation

  • SCP was retained as the independent fiduciary and provisional Chief Executive Officer of a family office with approximately ~$1 Billion in real estate holdings along with various operating businesses.
  • The four brothers within the family office were in a decade-long dispute related to the governance and operations of the Company, and the enforcement of various judgements against the brothers.
  • The operational condition of the holding company and the operating companies was compromised through the litigation process and needed remediation.

SCP'S SOLUTION

  • SCP stabilized the business operations of both the operating Companies and the real estate entities and consolidated all of the holdings into a single system.
  • SCP managed and/or settled the various third-party litigation workstreams to reduce the operating burn and improve the efficiency of the operation.
  • SCP retained a third-party manager to stabilize and lease up the various underperforming real estate assets and shut down the underperforming operating companies.
  • SCP also settled the various major loan defaults it inherited upon appointment, by negotiating improved partnerships and refinancing transactions.
  • SCP also oversaw a forensic analysis to ascertain the various money owed to and from the various brothers.

Results

  • SCP returned substantial capital to the brothers, to allow them to satisfy liabilities that they had related to the operations of the Company.
  • SCP then consolidated the various operations into a holding company to improve the management and execute the judgement.
  • SCP transitioned back the assets to the brothers to complete the assignment and allow the brothers to continue growth into the future.
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Independent Fiduciary Of A Mega-Mansion

Situation

  • SCP was retained by the trust of the owners to be the independent fiduciary of a mega-mansion in Los Angeles estimated to be worth between $250 - $500 million.
  • After a series of missteps by the developer, the Company found itself in a receivership, with an imminent trustee/foreclosure sale that was estimated to yield a value far below market value and well below the ~$165 million in liabilities.
  • SCP was retained to assess the situation, develop a strategy, and execute the plan to maximize value.

SCP'S SOLUTION

  • After assessing the situation, SCP identified that the best course of action was to bring in elite brokers to maximize the value of this unique asset.
  • SCP worked closely with the receiver and the lender to identify the right brokers and a budget to execute the sale in a timely, but appropriate manner.
  • SCP then managed the sale process and the Company to ensure that the sale process would yield the maximum value, and that the appropriate people would have access to the property to operate, as well as assess a potential purchase.
  • SCP also managed the various litigation workstreams to ensure that those issues would not impact the overall result of the sale.

Results

  • The property was sold through a highly competitive auction that was closed in 2022.  Most of the proceeds were disbursed to the senior secured lender, and the remainder of the assets are being distributed after the settlement of the various claims.
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Real Estate Holding Investment Fund

Situation

  • This real estate holding investment fund acquired over $1 Billion in commercial and residential real estate assets over the course of its existence. Due to a personal dispute between the owners, the Company was forced to file Chapter 11 bankruptcy to monetize the assets and return capital to its investors.
  • Litigants, the authorities and creditors of the Company were demanding an independent third party to maximize the value of the Company.

SCP'S SOLUTION

  • SCP quickly analyzed the situation and identified a strategy to selectively sell the vast majority of the properties to maximize recovery for the creditors and the various other constituents.
  • SCP selected best-in-class brokers and developers to partner with to drive recoveries far in excess of liquidation value. In some cases, SCP managed the re-development of their properties to improve valuations. In other cases, “under-water” properties were forfeited to minimize losses or use as concessions to creditors.

Results

  • As a result of SCP’s work, the creditors received value far in excess of the valuation expectations of the US Trustee and potential liquidators' opinions of value.
  • SCP’s independent role and professionalism yielded an orderly disposition of assets vs. a fire-sale.
  • This resulted in a full recovery to the lenders to the properties, and an improved recovery for creditors of fund, including the founders.
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Confidential Real Estate Client

Situation

  • Confidential Client (“Company”) is a commercial and residential real estate developer in North Texas. The Company’s Principal raised approximately $45 million dollars from approximately 270 individuals to develop and sell the real estate.
  • The Company and its Principal were charged by the Texas States Securities Board (“TSSB”) and Securities and Exchange Commission (“SEC”) with misappropriating investor money. Charges included paying for a lavish personal lifestyle, engaging in a Ponzi scheme, and misleading investors.
  • The Company was running low on funds and unable to close the sale of real estate assets due to the charges by the TSSB and SEC. Unable to monetize the real estate and facing significant charges from the governmental authorities, a new path forward was needed.

SCP'S SOLUTION

  • SCP devised a plan with the consent of the Principal and legal counsel, whereby the Principal would contribute all assets and control to a new entity created by SCP in order to finish and monetize the real estate assets, in an effort to maximize recovery to the stakeholders.
  • The assets and all control were successfully transferred to SCP and the Principal was no longer involved.
  • SCP’s plan was to take the assets and related entities into Chapter 11 bankruptcy protection to ensure protection and a path to complete the assets and sell them free and clear of liens and litigation.

Results

  • On January 16, 2019, the assets and control were successfully transferred to SCP. The former Principal stepped back and was no longer involved.
  • On February 17, 2019, SCP filed all the entries, now under control of a new HoldCo controlled by SCP, into Chapter 11 bankruptcy protection in the Eastern District of Texas.
  • The assets of the Company were sold for maximum value through a series of individual transactions to maximize recovery to the various investors in the Company.
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Woodbridge Group of Companies

Situation

  • An SCP professional was retained by counsel to the Company to conduct an investigation of the books and records and assets of the Company and formulate a strategic plan to maximize value of the assets for the creditors.
  • Through the investigation, in conjunction with counsel, it was determined that filing for bankruptcy was the optimal strategy to maximize asset values for nearly $1 Billion worth of ongoing real estate development.

SCP'S SOLUTION

  • When SCP arrived at Woodbridge, there was no functional organizational structure. SCP was responsible for creating company books and records from “scratch”, arranging the financing to operate, immediately shutting down the controversial fund-raising operations that were ongoing until the day of SCP’s appointment, termination of nearly 100 employees, testifying in court for multiple days over various trials, identifying the asset-maximization strategy that ultimately was deployed in the case, and effecting a transition to a full-time Chief Executive Officer.
  • SCP was retained and directed the filing of a Chapter 11 case. At the outset, SCP identified a DIP lender for $100 million to allow the Company to continue operating and for selective development of real estate assets.

Results

  • Through an extended trial over the installment of the trustee before the Company, SCP had the chance to present any defense of the trustee motion, and after that, the presiding judge rejected the expansion of the independent manager’s board to include a recently retired United States Bankruptcy Judge and a prominent attorney with more than three decades of highly respected Chapter 11 work to his credit.
  • SCP, recognizing that the overall restructuring process would, due to circumstances of spiraling litigation, benefit from an end to the dispute over a trusteeship, cooperated with the SEC and UCC to hire a permanent Chief Executive Officer and a new board of directors. SCP worked for the following two months to transition the day-to-day operations to the new team.