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A Different Road: Chip Hurley

Chip Hurley, Vice President, Signature Associates | TMA Member: 6 Years
Chip Hurley

Q: How did you gravitate into doing turnaround and restructuring work?

HURLEY: I went to college and majored in geology. Before getting involved with the real estate industry, I was a geologist in the environmental industry. Then things changed within Michigan that forced me to modify my career path. I went to school for a geology degree, and I ended working in commercial real estate. I didn’t expect that at all, but it’s been a fun experience.

Industrial-type properties often have environmental issues, so we’re guiding the client on doing environmental assessment work on a regular basis. That knowledge from my earlier career comes in quite handy on a regular basis.

Q: It sounds like you can speak the language of the people who are doing the assessments.

HURLEY: Most brokers go directly to the executive summary to see what the recommendations are. I can read the report and understand what they are talking about from a technical perspective. Consultants have different ideas about how to go about collecting data, and some are more conservative than others. Obviously, the more conservative they are, the higher the price tag for that work. Sometimes I intervene to ask questions and make suggestions. That’s not my business anymore, but I know enough to direct
a conversation.

I’ve been in the commercial real estate industry since 1996 and with Signature’s Grand Rapids office since 2018. We handle commercial real estate transactions for the entire west side of the state. I focus on healthcare, transportation, rail, industrial, and office properties. A lot of that also encompasses the turnaround industry in that any of those types of properties can have issues that would warrant involvement by turnaround professionals, whether it’s in a bankruptcy situation or whatnot.

Q: How long have you been working in turnaround/restructuring transactions?

HURLEY: I’ve been working on projects related to turnaround or distressed properties since 2011. That’s when I was introduced to TMA. At that time, I was handling commercial real estate for a local bank. That client asked me to assist them during the Great Recession. My contact at the bank was absolutely inundated with foreclosed properties and was tasked with assembling a team to handle the huge influx of properties the bank was taking back.

When I reported for my first day, I had 89 files on my desk for commercial properties that the bank recently acquired. My task was to visit each site and create a strategy to preserve and ultimately dispose of the properties. At that time, I had assets as far north as Traverse City, Michigan, and as far south as Tennessee and North Carolina. We ended up selling most the portfolio in a 2½-year period—about 120 properties valued at $40 million.

During that time, one of our SAG (special assets group) officers was a TMA member, and he asked me to be on a panel to discuss real estate and what we were looking at as a bank when we take these properties back. That’s how I was introduced to TMA.

Q: What have been some of your most gratifying, favorite, or important transactions?

HURLEY: Two occurred after I transitioned from the bank back into real estate. In my experience at the bank, I saw how borrowers were treated differently based on how they reacted to their situation. If someone were to come to the bank and say, “We have a situation. I don’t know what to do. How can we, as a team, collectively work through this and get back on track?”, that conversation was dealt with completely differently than if the borrower were to say, “Hey, I’m done,” and pitch the keys to the bank and refuse to cooperate in trying to find a solution to the problem.

Working closely with the special assets group on some of these conversations gave me unique experience. I don’t know of any broker in my market that has gone in-house at a bank and experienced that. When I got back into the commercial real estate industry, I was referred, and still am referred, quite a bit of business just because I have that experience.

I remember one example that involved a borrower in a distressed situation. This party asked me what they should do. I said, “Based on my experience, you can approach it two different ways. It’s not going to be an enjoyable conversation or experience, but you’re going to be dealt with far better going to the bank and saying, ‘Hey, what do we do? This is my situation. I want to work with you to resolve this problem’ versus walking away from the property and the bank.”

That client had a loan of $1.6 million, and we took the property to market and were able to obtain about $800,000 for it. The operation had shut down, and there was a deficiency of $800,000 once the asset was sold. There were some other underlying issues, including a partner who had skipped out. By working with the bank upfront, the bank took all of that into consideration, and his deficiency was reduced to only about $100,000.

In that particular situation, it made a huge impact on how the endgame was played by the bank and also by the borrower. The borrower had a huge benefit at the end, not having to come up with the $800,000 deficiency. He was able to financially work through a $100,000 deficiency and move on with his life versus a far worse situation.

When you’re telling clients this initially, they’re stressed out. You almost have to be like a parent talking to a child. “Just tell me the truth, and we’ll get through it versus trying to cover up things. Things don’t typically go well once that occurs.”

Another project I worked on was a large manufacturing facility that had shut down, and it had horrible environmental issues. I was able to work with the borrower and direct them to some resources that were available, one of which was a U.S. Environmental Protection Agency assessment grant to assist the buyer with soil and ground work testing to protect themselves and create a due care plan to eliminate their liability on the site. That grant was in the $50,000 range.

In general, I love working on projects that have a little hair on them because those are gratifying to take from a challenging situation to a resolution that is logical and beneficial to all parties involved. Those are the two examples of project types th

In general, I love working on projects that have a little hair on them because those are gratifying to take from a challenging situation to a resolution that is logical and beneficial to all parties involved. Those are the two examples of project types that I excel in.

Q: What are the key milestones in your career that helped you become the professional you are today?

HURLEY: What precipitated the change in the industry that pushed me toward a new career path was that in 1995, the state of Michigan had several events that led to a huge portion of the environment consulting industry being downsized at the time.

A fund for assessment and cleanup of leaking underground storage tanks, the LUST Fund, ran out of money for remediation projects. The state also changed its remediation cleanup criteria. Prior to ’95, if you had a release at a property, whether it be a gas station, industrial site, or dry cleaner, the criteria were all based on residential cleanup standards. In ’95, they went with more risk-based criteria. “OK, this is a gas station. It’s always going to be a gas station. Why are we going to clean it up to residential criteria? The risks associated with this site are different from those associated with a residential site.” It was the same thought process for other contaminated properties.

Those changes kicked me out of an industry that I was trained for in school, but ironically, they also put me in an industry that benefited immensely from the changes in those criteria. All of a sudden, you had the opportunity to take functionally obsolete, idle facilities that had not been productive and had not been generating a good tax base and create a situation where buyers could redevelop or reutilize these sites with little or no liability.

Other things that have been key to my success in my career are attaining my CCIM and SIOR designations. The Certified Commercial Investment Member denotes that I have completed advanced coursework in financial and market analysis and demonstrated extensive experience in the commercial real estate industry. With my background in environmental and geology, I didn’t have a lot of the business courses and the financial analysis instruction that the CCIM courses provided me. By the time I completed the coursework in 2000, I was a much better broker, because I had new concepts and new tools in the toolbox to use.

The SIOR stands for Society of Industrial and Office Realtors, and it represents the highest level of knowledge, production, and ethics in the industry, and inclusion as a member is approved by current members of the society. If you don’t adhere to ethical standards or you’re not conducting your business in a manner that is reflective of an SIOR, your peers will not accept you into the society.

Those two paths have educated me and allowed me to excel and become a better broker based on following the guidelines to be accepted into those organizations. Those are things that I rely heavily on, particularly the SIOR because it provides such a good networking opportunity. As in anything, the more you put into it, the more you get out of it, and I’ve spent a lot of time being involved with SIOR. I was actively involved with the Michigan Chapter for about 10 years and was the chapter president in 2014.

I’m also the 2020 president for the Commercial Alliance of Realtors, which is West Michigan’s commercial real estate association. That is an elected position.

Q: What role has your TMA membership played in your career?

HURLEY: It’s created a great opportunity to tap into resources and relationships that most of my industry doesn’t usually affiliate with. It allows me to maintain and add to my competitive advantage in my industry.

One thing I’ve been taking advantage of with this COVID shutdown has been TMA West Michigan’s Zoom networking events. Every week, our chapter executive, Rebecca Climie, coordinates a Zoom meeting with three or four people. I’ve been participating for the last four weeks, and it’s been great. Sometimes scheduling these calls is challenging, and Rebecca’s involved with the whole process. If she’s doing this for other people, too, it must be a full-time job to keep people networking. But it’s been fun and, I think, very productive.

Q: What advice would you give someone who was new to the industry or was thinking about doing some work in the industry?

HURLEY: I think networking with TMA professionals, whether it’s out to lunch or coffee, is really important. The risk factor on hiring somebody for a turnaround situation is far different from that involved in buying a bouquet of flowers. You have huge implications if something doesn’t go right on a turnaround, so you have to know and trust the individuals involved. The only way you do that is through networking and relationship building.

Q: Let’s shift gears a bit. What are you passionate about outside the office?

HURLEY: I’m 51 this year. I’m not a spring chicken anymore, so I’ve realized that life flies by pretty quickly. Obviously, a component of life is having the wherewithal to do things that you want to do, but also, I think it’s important to live life in the present and play as hard as you work. Otherwise, you don’t really have a balanced life.

What I’ve been trying to do, instead of waiting until retirement to hit my bucket list, is to keep track of things I want to do so that when opportunities present themselves, I’m able to check those items off the list. I had an SIOR conference in Portland, Oregon, last year, and one of my bucket list items was to ride my motorcycle all the way up the California coast. I’ve spent time in California, but I’d never ridden the entire coastline. I rode the motorcycle solo from Michigan to Los Angeles, drove all the way up the coast prior to the conference, and then rode back home afterward. I am so glad I made the time to do that trip.

Other things that I’m passionate about are spending time with my family and friends. My wife and I have a dog. We don’t have kids, so we have a lot of “us” time. We spend a lot of time with my folks in northern Michigan. Also, whether on the motorcycle or in our campervan, we love traveling the United States and discovering new places. It’s amazing how big this country is.

I think it’s also important to stay in shape, so I do a lot of cycling, primarily mountain biking. I’ve been biking since the early ‘90s. I’m not a gym rat. I don’t like working out, so it’s the only way that I know of that keeps me in somewhat good shape without feeling like it’s a burden to do it.

During the winter months we are usually downhill skiing somewhere.

Q: Did you live out West for a while?

HURLEY: When I got out of school, I started my career in Los Angeles, then transferred to the San Francisco area for a while, and ultimately moved to Michigan. I was in California for about three years.

Q: Were you on ski patrol in the West at all?

HURLEY: I was not. It’s always intrigued me, and when I came back to Michigan, I got a season pass at Crystal Mountain. The terrain here is far different from out West, and I was getting a little bored with what I was doing. I stopped by the patrol building and asked what it took to become a ski patrol. I like helping people, and I’m a social person. I got introduced to it back in the late ‘90s and started my training to become a patroller in ’99, so I’ve been patrolling for more than 20 years.

Until last year, I was one of the patrol directors for Crystal Mountain Resort. I was in that role for about seven years. That was a fun experience, but now I’m focusing on other things and enjoying my time just patrolling.

Until last year, I was one of the patrol directors for Crystal Mountain Resort. I was in that role for about seven years. That was a fun experience, but now I’m focusing on other things and enjoying my time just patrolling. I have become a regional toboggan instructor and evaluator for other advanced skills patrollers are trained for.

Q: What do you think lies ahead in the economic crisis created by the COVID-19 pandemic?

HURLEY: It’s so early right now to understand what the fallout’s going to be, but I think we’re going to be busy soon. I think the hospitality and restaurant businesses are going to be impacted the most. Offices are also going to be impacted, because companies are starting to re-evaluate their square footage requirements.

One of the renewals that I’m working on right now is an office building. Initially, the client wanted to downsize from 5,000 to 2,500 square feet because the space used to be a regional sales office and it’s changed function. But now with the COVID situation, they’re rethinking that, saying, “We don’t necessarily need 5,000 square feet, but if we have it, it’s easier to social distance.”

There are conversations starting to occur about real estate and social distancing, not to mention do you even need office space? There are so many people now working remotely. That’s going to change dynamics. That’s going to change conversations. Not only are we going to have turnaround issues that we’re going to have to deal with, but we’re also starting to rethink the dynamics of the office and how we use it. Historically, we all were used to cubicles or private offices. Co-shared space that allowed for collaboration has been the trend in the last several years, but now we have this health issue that could potentially jeopardize those office layouts.

With industrial properties, I think we’re going to have a larger demand for warehousing and logistics-type uses because everybody’s ordering electronically or remotely on the internet and it’s being delivered. That’s going to be a positive for industrial.

It will be really interesting to see where we are at this time next year. Vaccine aside, we’re going to have to start dealing with these issues with a long-term strategy and not a short-term, reactive approach.

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