After nearly two years of waiting, investors in a group of defunct mortgage pools formerly managed by Vancouver-based firm American Equities could start to see some money find its way back to them – although probably not as much as they were hoping.
The 15 investment pools were declared insolvent in May 2019 and placed into receivership, a process in which a court-appointed official is tasked with assessing an insolvent company’s finances and developing court-approved plan to liquidate its assets and repay investors and creditors as best as possible.
Portland-based financial consulting firm Hamstreet and Associates was placed in charge of the American Equities receivership. An initial rough estimate found that the pools collectively held roughly $34 million in assets against roughly $77 million in liabilities.
The assets consisted primarily of real property and mortgage or loan contracts. Most of the pools’ roughly 250 investors were individuals or couples living in Clark County or the Portland metro area.
The firm’s most recent quarterly report to investors stated that it had collected about $2.9 million so far. Hannah Schmidt, the receivership case manager at Hamstreet, said the firm will likely talk to the court soon about making an initial distribution to investors.
A new phase
The first year of the receivership focused mainly on assessing the pools’ finances and selling off real estate assets. The process entered a new phase in early 2020 when Hamstreet filed a lawsuit against American Equities itself, along with company president Ross Miles and other officials, alleging a yearslong pattern of mismanagement and self-dealing that contributed to the insolvency.
That case is currently set for a 12-person jury trial on Dec. 6 in Clark County Superior Court. Ross Miles declined to comment about the case.
The receivership’s second year has focused on that lawsuit and others filed against several parties who received loans using pool funds, as well as the ongoing process of securing and liquidating pool assets in Mexico, according to Schmidt.
The $2.9 million recovery figure does not include additional money that went toward receivership expenses, she said, which totaled about $3.5 million over the past 18 months, out of a total collected amount of about $6.4 million.
The bulk of those expenses were professional fees for services such as forensic accounting and attorneys. The initial expenses were larger, Schmidt said, in part because Hamstreet needed to get a clear picture of what happened to the various investment pools so that it could support its claims in litigation, which will hopefully recover further value.
“From receivership standpoint, we’ve sort of wrapped up our investigative phase,” she said.
Real estate liquidation
After selling off an initial round of properties through a real estate auction, the receivership’s focus has shifted toward other properties that were acquired over the past year through foreclosures on delinquent mortgage contracts.
Not every property is worth enough to justify the cost of pursuing foreclosure, Schmidt said, so the receivership is prioritizing high-value assets such as an office condo building in Olympia and a pair of single-family homes in Arizona and Idaho.
Hamstreet has also had “some success” in Mexico, she said. That was one of the early hurdles in the liquidation process – several properties or contracts in the portfolio involved real estate on the Baja Peninsula, and resolving or selling those assets promised to be a lengthy and complicated process.
Local government shutdowns due to the COVID-19 pandemic stretched the timeline out even further, Schmidt said, but the receivership has been able to acquire title to several high-value properties during the past year and resolve contracts on others. The delay resulted in an improved local real estate market, she added, boosting the value of those properties.
The receivership has also managed to get some of the portfolio’s delinquent mortgage contracts to start paying again, Schmidt said. Historically low interest rates have spurred some contract holders to refinance and pay off their original mortgages.
Schmidt estimated that as of the end of 2020 there was roughly another $6 million in real estate assets to liquidate and another roughly $4 million from contracts.
“I know that everyone wishes we were farther along than we are, but it’s not a quick process, unfortunately,” she said.
