Hartford Business Journal

30 Hartford Business Journal | March 22, 2021 | HartfordBusiness.com Company Profile By Matthew Broderick Special to the Hartford Business Journal L ater this month, New Jersey's Clementon Park & Splash World — one of the world's oldest amusement parks, tracing its roots back to 1907 — will be put up for auction. The park, which closed in Sept. 2019, is in need of new ownership. If no bidders emerge to buy the park in its entirety, its assets — currently under receivership by a third party — will be sold piecemeal including the land, equipment, rides, building and liquor license. The entertainment venue's situation is not unique. The uncertainty caused by COVID has negatively impacted commercial real estate across the globe. with more than $340 billion in commercial and multifamily debt maturing in 2021, according to Bloomberg News, private equity firms, like Enfield-based Capital Recovery Group (CRG) — which is overseeing the Clementon Park auction — are poised to find investment and liquidation opportunities, especially in sectors hit hardest by the pandemic like office buildings, hotels and retail establishments. Nationally, private equity firms are sitting on more than $196 billion ready to invest in U.S commercial property deals this year, Bloomberg reports, as cash-strapped real estate owners seek an infusion of funds to survive, or look to shed assets through liquidation. The latter is an area of specialty for CRG, says CEO Bill Firestone, who founded the 15-employee private equity firm in 1998. Prior to that, Firestone had built a traditional fee-for-service auction business — which remains a core component of CRG's business model — for distressed assets. But as the internet made real estate auctions global, he looked to add more client value by offering private capital investment. "It's sometimes easier for distressed assets to be sold because the cost of holding them would be very expensive," Firestone said. Under CRG's model, the firm offers auction services as a fiduciary agent, or in some cases will invest directly in property that a company is looking to unload quickly due to product line changes, shifts in market demand or increased cost pressures, all of which have been more prevalent during COVID. In the latter situation, Firestone's firm may purchase a company's assets and sell them for a higher price to generate a return on investment. And unlike larger private equity firms, which use outside investors to pool capital, CRG's money comes strictly from its partners. "What companies [facing cost pressures] want is a degree of certainty," Firestone said. "Private equity investment can help their bottom-line decisions." Changing dynamics Jeff Boyle, the Seattle-based former director of sales operations for juice brand Odwalla — which relied on CRG's equity investment last fall — understands those cost pressures firsthand. In July, Coca-Cola North America, which distributed Odwalla juice and smoothies since 2001, announced it was shutting down the product line amid faltering sales and shifting consumer demands. That left Boyle and his team with massive assets to offload, including a fleet of 319 rfrigerated trucks, production equipment and walk-in coolers across 15 locations nationwide. Rather than maintain the equipment and the associated costs, Boyle sold the company's assets to Firestone's firm for a set amount, which CRG, in turn, auctioned for an undisclosed sum. Boyle says working with CRG not only helped his company save money by selling its equipment inventory, but also by eliminating the costs Odwalla would have incurred to remove the equipment for a new buyer. That responsibility instead was overseen by CRG, which temporarily owned the equipment before it was auctioned. "Just removing a walk-in cooler in one case would have cost [us] close to $50,000," Boyle explained. Ultimately, the company's liquidation targets, including cost avoidance, came in under budget. Within six months, CRG had sold the entire Odwalla inventory. That's in line with the firm's typical liquidation time horizon, which ranges from 90 days to 18 months, Firestone says. "Our average investment is typically in the $2 million to $10 million-dollar range," Firestone explained, "but we've done deals as large as $45 million." Firestone says the firm's target return varies by project and risk. For larger, longer-term investments of six to 18 months, he says the desired return on investment is in the 20% range. Assuming that investment risk means understanding marketability of equipment and trends in key industries. CRG focuses on a number of real estate and equipment-heavy sectors including construction, food and hospitality, warehouse and distribution and manufacturing, which provide maximum flexibility to bundle assets to liquidate them separately. The company's client base is global. While the majority of its business — and auction inventory — are U.S.-based, Firestone says CRG has done business on every continent. Closer to home, he sees shifts and opportunities in Connecticut. "Retail locations are definitely changing as distribution of how people get their products delivered has changed," Firestone says. For example, there is greater demand for warehouse space from online retailers like Amazon, which has transformed consumer shopping habits. Gary Schless, first vice president with commercial real estate firm CBRE in Hartford, agrees. He is also concerned about the value of the region's office space. He says the shift to remote and hybrid work will likely continue after COVID, which creates uncertainty in the local commercial real estate market. He says there may be pressure among commercial property owners — if need and demand decline — to reduce rental and leasing rates, which he says have not changed much in Hartford over the past 20 years. "Even if [owners] come down on prices, taxes and operating expenses continue to rise and many [commercial] landlords may have no choice but to lose these buildings and give them back to the lenders," Schless said. That's the dynamic that has brought Clementon Park and Splash World to the auction block — and created increasing opportunities for Capital Recovery Group. As COVID has shifted work patterns, consumer behaviors and the commercial real estate landscape, even amusement parks it seems are no longer all fun and games. Capital Recovery Group President Bill Firestone said his private equity firm sees opportunity as COVID-19 creates challenges for companies in myriad industries. PHOTO | CONTRIBUTED Enfield private equity firm CRG has global reach At a Glance: Company: Capital Recovery Group Industry: Private equity Top Executive: Bill Firestone, President HQ: 1654 King St., Enfield Company Website: https://crgllc. com/ Phone Number: 860-623-9060

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