Alvarez & Marshal, a New York-based corporate restructuring, crisis management and creditor advisory firm, has created a new Real Estate Advisory Services (REAS) group to provide financial consultation and analysis to the real estate industry. The group, which is headquartered in Dallas and was formed in May 2003, currently consists of 10 consultants.

These consultants target owners, investors and lenders of real estate portfolios that total approximately $100 million. However, the REAS group has worked on much smaller, individual assets, according to William “Biff” McGuire, managing director for the group.

As part of its services, the REAS group provides mergers and acquisition consulting, which includes financial and market due diligence and underwriting, and structuring services to real estate buyers, sellers, investors and lenders. It also provides restructuring and litigation consulting such as real estate strategies, and restructuring and crisis management services to troubled real estate companies, and expert witness testimony for real estate court cases. Corporate real estate services include financial strategies — including site selection, development oversight, sale-leaseback structuring, lease oversight and strategic planning — for corporations that lease and/or own real estate to operate their business. Lastly, the company also provides deal sourcing and execution, financing and exit strategies, development oversight and asset management services to real estate owners.

Large accounting firms have historically performed these types of services to audit clients, however, they are now prohibited from doing so as a result of recent corporate governance reforms such as the Sarbanes-Oxley Act. Established in August 2002, the Act prohibits audit firms from providing services that are possibly in conflict with their responsibility of acting as a watchdog over the clients’ financial statements for shareholders and other public parties, McGuire says.

“The need for the act arose out of the perceived conflicts of interest in the Anderson/Enron case where the audit partner was compensated for selling additional services to Enron and possibly looking the other way on certain accounting issues,” McGuire explains. “However, this has not been proved in regard to Enron, and Anderson was not the only firm compensating its audit partners to sell other services to their audit clients.”

In addition to the Sarbanes-Oxley Act, the general rules — established by the U.S. Securities and Exchange Commission — prohibit accounting firms from taking on management positions for their clients. Alvarez & Marshal decided to create the REAS group as a result of these combined limitations. “The other driving force is the complementary services that Real Estate Advisory Services provides to the core restructuring business of Alvarez & Marshal,” McGuire notes.

The group’s consultants have experience in commercial real estate product types including retail, office, industrial, multifamily, hospitality, entertainment and even healthcare, McGuire says. Its typical clients are investment banks; financial institutions such as banks, insurance companies, and pension funds; real estate investment trusts; real estate funds; and private real estate companies, corporations and law firms. The REAS group does some work for developers but very little work for brokers.

According to McGuire, the group plans to have an additional 14 consultants within the next 12 months. In addition, it plans to open other offices in New York, Chicago, Atlanta and Houston next year.

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