Crescent Emerges from Bankruptcy, Putting $1B in Debt in the Past

June 14, 2010
By Barbra Murray, Contributing Editor

It’s a new day for Crescent Resources L.L.C. The Charlotte, N.C.-based real estate development and land management company has just wrapped up its financial restructuring and emerged from Chapter 11, almost exactly one year after having filed for bankruptcy. Crescent’s balance sheet is now minus a whopping $1 billion.

“To emerge from Chapter 11 in 12 months was a huge accomplishment,” Andrew Hede, CEO of Crescent Resources, told CPE. “It’s a credit to our entire company in terms of our employees and respective stakeholders.”

When Crescent announced on June 10, 2009, that the company and certain subsidiaries had filed voluntary Chapter 11 petitions in U.S. Bankruptcy Court, the company reported approximately $2.2 billion in total assets and $1.9 billion in total liabilities. Those liabilities included nearly $1.2 billion outstanding under a term loan facility that was part of a June 2008 prepetition agreement with a group of lenders led by pre-petition agent Bank of America. Crescent’s bankruptcy filing was prompted by the same circumstances that pushed so many other commercial real estate companies down the same road in 2009. In his declaration in support of Crescent’s and its subsidiaries’ Chapter 11 petitions, company CFO Kevin H. Lambert noted, “Several factors have led to the commencement of these Chapter 11 cases, including the significant downturn in the real estate market, increase in the level of debt and unavailability of additional funding.

While the real estate industry has yet to bounce back, the company is making plans to move forward on the heels of its successful restructuring. “From our perspective the next step is developing the assets we do have on a timeline dependent on the market,” Hede said.

Crescent develops a wide range of property types, including Class A office space, business and industrial parks, shopping centers, mixed-use projects, country club communities and single-family neighborhoods in the Southeast and Southwest. “We see multifamily recovering a lot quicker, followed by residential and commercial. We’re not seeing demand for retail and industrial, and in the office market, we want to see job growth, and the market needs to absorb more product.”

Other industry experts concur that the multifamily market is, indeed, headed for a rebound. According to a report issued in May by Marcus & Millichap Real Estate Investment Services, the apartment market is likely to stabilize this year, and fundamentals are on track for a healthy recovery in 2011. The report notes that renter demand is expected to rise this year as employers slowly increase staff. Crescent is making careful moves to prepare to accommodate the market’s anticipated uptick in demand; the company has a project in Nashville that will likely go into development later this year.

“From our perspective, we’re well positioned to compete as the real estate market recovers,” Hede said. “It’s been a challenging 12 months, but having restructured our balance sheet gives us a significant advantage over our competitors.”