The commercial real estate market is a mess and getting messier by the month, but local companies involved in the process of cleaning it up are enjoying the best of times.

 

San Diego court appointed receivers Trigild and Douglas Wilson say they’ve gotten so much business in the past two years, they’ve had to turn a lot of opportunities away.

 

“Our gross revenue has doubled from last year, and our net has more than doubled,” said Bill Hoffman, president of Trigild and a 33-year industry veteran.

 

Before the recession took hold, Hoffman says his business, which manages and sells the distressed assets of defaulted borrowers, would get a few calls a month for new potential projects.

 

By 2008, those calls began averaging two a day. In the past several months, the calls from lenders are up to about six a day, including one daily for yet another defaulting hotel loan.

 

“The hotels are a disaster, and it’s going to get much worse before it gets better,” Hoffman said.

 

As both business and leisure travel has dropped nationally, hotel vacancy rates are reaching record highs. The worst-hit places have been three- and four-star-rated, upper-end chains. Hoffman says Trigild now has Marriotts and Sheratons in its portfolio.

 

Many of the hotel chains are simply giving back the properties to the banks because the debt load is so much higher than the property’s current value, and owners realize they’ll never get out of the hole, Hoffman says.

 

Trigild currently manages about 150 properties in some 20 states. Original book value on the properties was more than $4 billion, but the market value is well below that. Hotels may be worth less than half of what they were just two years ago.

 

Doug Wilson, president of the firm he founded in 1988, says that as his development side of the business has languished, the receiver side “is doing well, no question about it.”

 

“Towards the end of the year things slowed down a little bit, but in the last 30 days it’s increased in velocity,” Wilson said. “We’re seeing a lot more properties in the hospitality industry, of all types from higher-end hotels to resorts, particularly golf resorts. We’re also seeing more retail.”

 

About three years ago, the Wilson receiver portfolio was dominated by condominium conversions, vacant land and master-planned communities. In the past year, the trend has been toward more commercial properties.

 

Wilson says there are two main buckets generating business for his firm, the banks that foreclose on properties, and an escalating number of securitized commercial loans that have gone bad, and are held by special servicers. Those servicers, in turn, name receivers to actually manage the defaulted properties, sometimes completing construction, and eventually selling them to buyers.

 

Last year, Wilson’s firm was appointed receiver to a half-built 12-story office building in Washington, D.C.

 

Wilson says he’s hired a contractor to finish the job on the 442,000-square-foot building, which should happen in about nine months. The firm will then begin marketing the building for sale.

 

Another big project in the Washington, D.C., area involves managing an office near the University of Maryland intended to be headquarters of the National Oceanic and Atmospheric Administration. A dispute between the federal government and the developer, Opus East L.L.C., ensued and the latter filed for bankruptcy last year. It could take a year to unravel, says Wilson.

 

It’s also managing The Stanford Court Renaissance San Francisco Hotel. In all, Wilson says his firm’s portfolio has some 60 projects valued at about $2 billion.

 

To handle all the new projects, Wilson hired about 10 people in 2008 and four last year. But receivers tend to run lean and the total employment is only about 50, including folks in offices where the real estate markets have been hit the hardest: Atlanta, Las Vegas, Miami, Orlando, Fla., and San Francisco.

 

Trigild similarly has only about 62 people, with about 50 based locally. Trigild has added about 20 employees in the last 18 months, mostly real estate analysts and property managers in the real estate division and two paralegals in its Receivership Services Group, according to Hoffman. The outside group is assigned to projects mainly in Arizona, Florida and California, again the epicenters of overheated real estate markets.

 

Hoffman refers to the group’s members as his “road warriors,” because they’re always moving around, staying in hotels, and usually working from their laptops, not in offices.

 

Hoffman says the prospects for a quick turnaround in the commercial market are slim to none. “It’s no better than it was last year, and I see it getting worse not only for where we are now, but where it’s going to be,” he said.

 

“There’s a tremendous amount of property debt that needs to be restructured. The loans are coming due, and the properties are upside down,” Hoffman said.

 

While there are plenty of potential buyers for the distressed properties, Hoffman says most are more like shoppers, not really interested in making a deal.

 

In many cases, the banks are delaying the pain that must ensue if the markets are to ever recover, Hoffman and others say.

 

The lenders are holding back on selling the foreclosed assets because the values have taken such a hit, and the losses would impact their capital levels.

 

Alan Reay, president of Atlas Hospitality Group, an Irvine hotel consultant, says there is a veritable tsunami of problem assets that is being unleashed by banks as the markets continue to deteriorate.

 

“The commercial banks now have about $15 billion worth of foreclosed commercial real estate and that could easily double or triple this year,” he said.

 

Both receivers say they have lots more competition these days, but aren’t too worried.

 

“There’s about five to six times the number of receivers in the country today than there were a year ago,” said Hoffman. “But 95 percent of them won’t be around in a few years. We generally get to pick and choose, and usually are getting the best stuff.”

 

Said Wilson, “Four years from now, all these newbies will no longer be calling themselves work-out guys, and will be back working out in the gym.”