Restructure This! Podcast Ep. 21
Real Estate Restructuring – Views from Another Side with Emily Gottlieb
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Sheppard Mullin's Restructure THIS! podcast explores the latest trends and controversies in Chapter 11 bankruptcy, commercial insolvency and distressed investing. In this week's episode, we delve into real estate development with Emily Gottlieb of AW Properties Global, including discussing commercial-to-residential conversions, redeveloping vacant land, and more.
Guests:
About Emily S. Gottlieb
Emily S. Gottlieb has more than 18 years of experience in the restructuring industry. She began her career as a real estate attorney working on large commercial transactions at Faegre Drinker Biddle & Reath and transitioned into a bankruptcy practice. Emily continued her restructuring work at DLA Piper, representing debtors, creditors, committees, financial institutions, Trustees and receivers in all aspects of Chapter 11 and Chapter 7 proceedings, workouts and litigation.
For over a decade, Emily worked for a prominent national bankruptcy and class action administration company as a business development executive and head of Midwest operations, where she managed the Chicago office. Prior to joining AW Properties, she was on the senior leadership team of a major not-for-profit organization in Chicago.
Emily is active in the turnaround community as a member of TMA and IWIRC and previously served on the board of IWIRC Chicago. In addition to being an attorney, she is also a licensed real estate broker and a member of the Chicago Association of Realtors (CAR) and the National Association of Realtors (NAR).
About Justin Bernbrock
Justin Bernbrock is a partner in the Finance and Bankruptcy Practice Group in Sheppard Mullin's Chicago office, where he focuses on all aspects of corporate restructuring, bankruptcy and financial distress. He represents clients across a wide range of matters, including debtor and creditor representations. He has substantial experience in out-of-court and in-court restructurings, primarily in the Southern District of New York, Eastern District of Virginia, District of Delaware and Southern District of Texas.
Transcript:
Justin Bernbrock:
On this installment of Restructure This!, we welcome Emily Gottlieb, a senior vice president with AW Properties based here in Chicago. Emily is a very well-regarded restructuring and real estate professional, and someone who has experience across both the legal side and business side in complex restructuring matters. I've worked personally with Emily in the past. She's certainly an impressive professional, and we're glad to have her on the podcast. As always, stay tuned after the interview for a quick rundown of current restructuring news and notable stories.
And as I mentioned, we're joined today by Emily Gottlieb, AW Properties. Emily, it's so good to see you and have you here. I think you may be our third in-person podcast guest. I think I may have that right. Welcome. We're so thrilled that we were able to make this work and very interested to hear about what it is that you're doing at AW Properties. I guess to start, what got you interested in restructuring? Where did Emily's career start?
Emily Gottlieb:
Well, first to start off, it's great to be here. Thank you. I know we've known each other for many years. I would say it's interesting because my career actually started in this very building when it was the Quaker Oats Building. The firm that I started at was, it's now Drinker Biddle. I did start in the real estate group, surprisingly, and that group was very slow. After I learned a little bit of real estate, I moved over to the restructuring group because that was busy. And then I moved over to DLA Piper, and I was there over seven years. I did all kinds of work there, mega cases. We represented Chapter 7 trustees.
It was a really good mix of different kinds of cases, got good exposure in court. And from there, I was recruited to work at Garden City Group. I worked at The Garden City Group for 10 years, and I left to work for a not-for-profit shortly before the company was acquired by Epic. I was in that senior management role at the not-for-profit and left right before the pandemic hit, which was an interesting time, and was just deciding what I wanted to do. I wanted to get back into restructuring, not practicing again. No offense.
Justin Bernbrock:
I get it.
Emily Gottlieb:
I had known Diana Peterson, who's the CEO of our company, and she was looking to expand into the restructuring more of the distressed real estate side of things. And since that was my background, it just seemed like a good fit to join her. I got my brokerage license. I still have my law license.
Justin Bernbrock:
What is your precise title and role at AW? What is it you find yourself doing day in, day out?
Emily Gottlieb:
AW Properties is a boutique real estate brokerage company. We also do consulting. We have an in-house auction company, and we sell every kind of asset class all over the US and internationally. My role is to focus on distress sales primarily just because of my background. We do 363 sales. We sell real estate that might be distressed, unless we sell it for a certain price.
We sell the real estate in the business. We also do healthy deals. I recently sold a luxury home in Lincoln Park. We run the gamut. But my role is really to focus on my background in the restructuring field and to try to bring in deals real estate related to bankruptcy or not work out.
Justin Bernbrock:
I got to imagine that having that restructuring bankruptcy lawyer background is pretty helpful. What corollaries or connections do you see between the two roles?
Emily Gottlieb:
I find that my background really helps out in a lot of deals. We just did a 363 sale in Indianapolis. In that case, I got to work really closely with counsel on the bid procedures and being able to identify issues specific to the real estate and the law. It's kind of like when you're a creditor's attorney, it makes you a better debtor's counsel and vice versa. I think it's a value add, being able to have that background and just working on the bid procedures, how everything's going to run. It's a value add.
Justin Bernbrock:
I totally agree from my own experience. What do you think are your primary sources of business development or business origination? Because I know that at least it seems to me like that tends to be a focus of a lot of your work. How are you coming by new deals? We can get into in a little bit what you're seeing in the broader market generally.
Emily Gottlieb:
I would say, and you probably agree, that all business development or sales, really whatever industry you're in, comes down to relationships and building up those relationships, having people trust you and want to work with you. It's something you build up over many years. For me now, it's reminding my context of what I'm doing, how I can help them, how I can help their clients. I did take a small hiatus from the world of restructuring when I went to work for the not-for-profit, but I stayed active with a lot of these people because you become friends with them, and just reminding them, reintroducing myself, what I'm doing.
Diana, like I said, our CEO, already had a great reputation in the industry. There's that piece. I'm always expanding my network, focusing on just real estate in general. Like I said, I had that house that I sold the Lincoln Park, and that was actually the result of a cold call, which I know nobody likes to make cold calls, but you just never know. Still doing those kinds of tactics. They still work.
Justin Bernbrock:
Was that a distress sale, or it was just a regular way sale?
Emily Gottlieb:
That was a healthy sale. Like I had said earlier, we do have this in-house auction division, which you use for a 363 sale. We have online auctions. We sell industrial assets online often through an auction. The luxury home auction piece is a separate area. A lot of times people want to buy homes that are on auction because there's some cache to it. You get a different kind of audience. This was at a time when homes weren't selling as well in Lincoln Park, and it was a really interesting home.
I just started calling brokers who had homes for sale that they were trying to sell for a while and said, "Do you want to pair up with us, partner? We can expose your home to this different network, people who are looking for auction." That's how we sold it.
Justin Bernbrock:
Without getting into the specifics, do you think that that process generated or promoted more value than a private sale?
Emily Gottlieb:
Oh, definitely. I mean, they sold for a lot more than they would've gotten, just because there's a whole network of buyers that only want off market deals. Our database at AW Properties is enormous, over hundred thousands of different kinds of investors, buyers, brokers on the social media network and just who we e-blast to. The buyer noticed this was looking for something different. I still get calls from brokers in the city, "How did you sell that for that amount?" It's just because it's a different kind of buyer and also people get excited about an auction.
Justin Bernbrock:
Right. I was just thinking that there's this weird psychological aspect to auctions. I think this is true in 363 bankruptcy deals. I mean, there's this irrational exuberance that attaches, and it is fascinating. See, now I tend to think that, at least in the deals that I've been involved in, whatever buyer has the highest and best bid is still getting a pretty darn good deal.
Emily Gottlieb:
Oh yeah.
Justin Bernbrock:
Because at that point, it has gone so low that it's hard not to get a good deal.
Emily Gottlieb:
Yeah, that's for sure. This home was beautiful. I mean, it was a gorgeous home with an elevator and an in-house gym. It was on Dayton Street. It was gorgeous home. I just think that sometimes when things sit on the market, they lose value just because they've been in the market. At the end of the day, it was a beautiful home and the right buyer got it. It's a cool experience just for me to see it from the other side of things.
Justin Bernbrock:
That is really neat. I think that this auction component that you all offer is different and it's unique and it has this almost other realm of ability to generate interest in things, which is really cool from my perspective. I guess more broadly then, what's going on in the real estate market? What are you all seeing? I will say anecdotally, notwithstanding that we are here today doing this interview, this floor, the floor below is not at full capacity.
If we look out the windows at the buildings next door, you have to search to find another human being in a high rise in Downtown Chicago. It seems to me like there's some pretty heavy pressure on the commercial real estate market, but I'm curious as to what you guys are seeing.
Emily Gottlieb:
Yeah, definitely. Office space, medical buildings are not selling as well. Vacant land never sells that well. Those are definitely areas that are going to be problematic. I would say we're getting more calls on the restructuring side, especially some of these sub five cases have a lot of real estate, so there's going to be a lot of pressure. But at the same time, for investors out there, I think people are also waiting for some good opportunities. But I would say office spaces, it's problematic and I think it's going to continue to be.
Justin Bernbrock:
Do you think there will be, because I think that some buildings have attempted or in the process of converting to residential, have you seen much of that? All I'm basing that off of is just anecdotal reports or stories that I've seen. I don't know if there's a more uniform approach by certain landlords to certain properties to convert to more residential.
Emily Gottlieb:
Yeah, definitely. That's hotter redevelopment than building from the ground up. That's always the option. That's, like what I said before, how vacant land is never great because it's much easier to redevelop something that's already there, especially nowadays. That's definitely true what you're hearing anecdotally and seeing.
Justin Bernbrock:
It's an interesting point about, and I won't confess or admit precisely why I'm focused on this, but how vacant land is different than redeveloping existing land. I guess, why is it the case that folks aren't more interested in just a total clean slate?
Emily Gottlieb:
It just has to do also with what you can do with the land zoning. Vacant land also depends where it is, obviously. I mean, one thing from where we stand is we get asked to sell vacant land and we can sell it because we sell difficult assets. It just takes a little longer.
Justin Bernbrock:
I mean, I guess it makes sense when you have to think about the interplay of whether it's zoned for a certain use or not, the administrative hurdles of conforming the property to what it is you want to want to use it for. That's interesting.
Emily Gottlieb:
I was just going to say getting supplies needed.
Justin Bernbrock:
Sure, yeah, or even whatever the existing infrastructure is to supply that parcel, like if it's totally brand new or unimproved land like sewer, water, gas, all these other things. That's a lot. I imagine it's a lot to deal with. You mentioned a recent case or that you had been involved in some recent stuff. Do you want to tell us a little bit about the case and what it was that you all were dealing with there? I think it was a sub chapter five case.
Emily Gottlieb:
Yeah, that was a sub five. That was in Indianapolis. It was a sub five case there. The debtor had owned many condo units and homes on the campus of Purdue University, and we were hired to sell all those assets. It was really interesting, because when we went to market, there was a lot of interest in these units because it was on campus housing, and that's very hot right now for anyone trying to get campus housing for their kids in school. But in general, that's very hot. Like I said, we just had a ton of interest from alum and just people all over the country. We did have an auction, it was a Zoom auction, and eventually we sold those units to a buyer from the Cayman Islands, an investor.
That, again, just shows our reach of our database and who we're marketing to. We did do some paid advertising, but that person I think just came through our own database. It was a really interesting case just because of the different parties involved. The counsel we worked with was fired by the debtor, another counsel became involved, and eventually the sub five trustee was appointed as the debtor in possession took over the case. Again, I felt like my bankruptcy background really allowed me to navigate those twists and turns and understand where we were going. Eventually we were very successful in the sale. That was a nice ending after all of that.
Justin Bernbrock:
It sounds like a very well run process, but also an attractive asset. I've been back down to Champaign where the fine University of Illinois is located. It seems every time that I go back, there's another large residential building for student housing. It's making me wonder if I should go buy student housing down there.
Emily Gottlieb:
Yes. It's a great investment. When I went to my old school, I went to the University of Michigan, and these buildings were very nice.
Justin Bernbrock:
I've heard of that.
Emily Gottlieb:
You've heard of that school? We can still be friends. The housing down there now is beautiful. These buildings have gyms. They're very fancy, not like where I used to live in school.
Justin Bernbrock:
Well, I know the University of Illinois at least is a very well-known engineering school. There's this influence, I think, of tech and engineering on some of the housing for students. They're looking for or at least hopeful of benefiting from having ready access to food and exercise facilities and other creature comforts that they're seeing a lot of the tech companies do out west, which is interesting. I'm happy to learn about what it is that you all are doing at AW.
I also want to just hear from you your thoughts on transitioning out of active law practice into... I mean, you had this time working at a not-for-profit. I think that there may be this perception among younger restructuring lawyers that once you're locked into this track, it's very difficult to get off and find something else that you want to do or to do. I think you are a very strong example of how that is not the case. How was that decision process for you? What were some of the things that you thought about or that you considered?
Emily Gottlieb:
That's a really good question, and I see you put so much into your education and working at these firms. I really enjoyed working at DLA. Like I said, I got to try work in a lot of different areas between representing creditors and debtors. I thought I would be there for a while. After some time, I did want to try to get out of big law and do something else. I was not necessarily wanting to leave the practice. And frankly, when I got a call from the head hunter about The Garden City Group, I was thinking, do I really want to leave? Because once you leave, it's hard to get back. But I went to New York I met the executive team.
I met the team. I talked to a lot of people that did different things. I like that I was still kind of using my bankruptcy background just in navigating some of the cases. Even though I was more business development, they liked having lawyers be a part of the process who know what they're going through and what you're doing and can add some value. I would say if you are looking for a change, it's doable, but just do your due diligence and go with your gut too and how things feel. It ended up being a great experience for me. It's hard. It's a hard decision.
Justin Bernbrock:
I can imagine. As soon as this podcast takes off globally, then I'll just be a full-time podcaster.
Emily Gottlieb:
Yeah, I can see it. You're good at this.
Justin Bernbrock:
Well, I mean, it's fun. It's interesting I think to learn about people in the restructuring industry that have similar backgrounds. Do I have it right or do I remember correctly that your company... I know the CEO or the president, is it Diana?
Emily Gottlieb:
Yes, Diana Peterson.
Justin Bernbrock:
But it's women-owned, women-led.
Emily Gottlieb:
We're a women-owned business. Having that title, we've gotten some government contracts, which have been interesting. Sometimes it allows us to get into cases because people want to work with just women. Other times it can be difficult because the bankruptcy world can also be an old boys club. I like working with Diana. She's super smart. She used to be a litigator. It's fun to work in a women-owned business especially in the field that we're in and gets us opportunities, like I said.
Justin Bernbrock:
I do like to always ask our guests, if you weren't doing what you're doing at AW Properties and assuming no limitations worldly or otherwise, what would you be doing?
Emily Gottlieb:
If I could really do anything and I had talent, I would be on Broadway.
Justin Bernbrock:
Oh yeah? Musical theater?
Emily Gottlieb:
Musicals. I love musical theater.
Justin Bernbrock:
Really?
Emily Gottlieb:
Yeah, but I have no talent whatsoever. But I just think that looks like so much fun. Also, you can't if you have any children. But that would be really fun, I think.
Justin Bernbrock:
Do you frequently go to see it?
Emily Gottlieb:
Yes, I go. I just love Broadway. I love musicals. I like plays too, but I like musicals the best. My kids love it too. We have a lot of fun going to the shows. They always are having so much fun up there. It's not easy.
Justin Bernbrock:
I'm a huge fan of the podcast, the SmartLess Podcast, which is Jason Bateman, Will Arnett, and Sean Hayes. Sean Hayes is a musical theater performer and he had a show here in Chicago for a while called Goodnight Oscar. I don't know if you saw it.
Emily Gottlieb:
Oh no.
Justin Bernbrock:
They're going to Broadway in April, I think. If we're out there at the same time, I'd be more than happy to go see a show. I think that'd be a lot of fun.
Emily Gottlieb:
That would be fun, because we've exhausted everything that's here right now.
Justin Bernbrock:
Yeah, indeed.
Emily Gottlieb:
They need some new.
Justin Bernbrock:
Well, Emily, thank you so very much for sitting down and chatting with us today. I'm excited to see where you next are going to show up in a big case and sell stuff hopefully either to our clients or for our clients. It'd be really great to work with you, and it's always great to see you. Thank you.
Emily Gottlieb:
Thank you for having me, and we would love to work with you. Let us know how we can help.
Justin Bernbrock:
Anytime.
Robbie McLellarn:
Well, hello, again, everyone. This is Robbie McLellarn with Sheppard Mullin with this week's current restructuring news. Popular energy drink, Bang Energy, one of my personal favorites I might add, continues its journey through Chapter 11. Just last week, Judge Russin in the Southern District of Florida approved the debtor's bid procedures motion for a sale of substantially all of the debtor's assets. Among their approved procedures, all bids must include a $50 million cash deposit and incremental bids must be made in $10 million increments.
The bid deadline is set for April 24th, with a closing date deadline for the sale of May 24th. Hopefully a successful sale process will allow Bang Energy to remain on store shelves for a long time to come. In other news, the FTX Group debtors are seeking approval of an agreement with Voyager and the respective unsecured creditors’ committees to resolve the approximate $445 million adversary complaint filed by one of the FTX Group debtors against Voyager. This appears to be just another step in what has proven to be a very complex bankruptcy case.
Well, that's it for current restructuring news. This has been Robbie McLellarn with Sheppard Mullin for Restructure This! Until next time, thank you for listening.
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