Repo Man Inc

1. (An article that appeared in Toronto Life)
Repo Man Inc.

When the economy goes bust, Leon Platt’s “distress management” business booms: a journey into the
world of profiting from loss.

Leon Platt is conducting his own personal guided tour of the city. The first stop is a band-new economy-
class hotel in a down-scale neighbourhood. The premises are neatly appointed. The underground
garage is spotless. The staff is courteous and friendly. All that’s missing are the guests. The task facing
Platt is to fill this place with enough paying customers so that the property can begin to carry itself. In
his own words, this hotel is “ahead of its time.”

Platt is a tactful man.

The tour continues. The next attraction is a luxury office-condominium complex. It rises on a downtown
site where several office and apartment buildings were demolished a few years ago. Platt’s job was to
get the site ready for redevelopment-which meant he had to empty the buildings and persuade some
reluctant tenants to leave before their leases expired. Now, a huge billboard issues an open invitation
to prospective new tenants.

Still travelling through the city core, we pass by a chichi restaurant – the star attraction of a once
moribund plaza that Platt helped to turn around about eight years ago-and arrive in front of some
elegant Rosedale apartment suites. The building is a recent casualty, symptomatic of a brutally soft
high-end rental market. “How,” Platt asks rhetorically, “does an apartment building in Rosedale go belly
up?” In this case, tenants who couldn’t, or wouldn’t, continue to pay up to $1,800 for a luxury unit
walked, and the building’s highly leveraged owner defaulted on his mortgage payments. Platt’s
assignment is to hold on to existing tenants, line up new ones and help find a buyer. “In this market,
we’re offering incentives of several months’ free rent to avoid losing more tenants,” he says.

The landscape changes as we slip down into the underbelly of Toronto, stopping by a crack house in
High Park. As a rule, Leon Platt doesn’t do houses. “We will not look at houses if there are families
living in them. We stopped doing that. I’m not throwing people out...” explains Platt, who says he
turned down requests to repossess more than 500 homes from September 1990 to January 1991. But

2. as a favour to a client, he and a dozen of his karate-trained associates recently spent a full day securing
the premises of this crack house and clearing out tenants. “We relocated some to motel strips and
others to rooming houses.”

The next stop on the tour is the site of one of his earliest and most challenging assignments, a once
embattled apartment building that had been overrun by bikers and hookers. Platt got involved after a
lawyer had been run off the property by hostile tenants. “There had also been incidents with the
superintendent and the owner. They didn’t have the knowledge or expertise, “he says. “You couldn’t
come on heavy with these guys. You had to try to be very tactful with them so they didn’t become
antagonistic. If you had said the wrong thing, they would have come at you in the wink of an eye.”

We decide to skip the strip plazas in Scarborough, the half-empty medical clinics in Etobicoke, and the
hotel-tavern in Pickering, where the former owners walked away in the night with all the fixtures and
equipment. Although no irony is intended, our final stop on this tour will be a funeral home in the
Beaches. Even Platt, who has a stronger stomach than most, admits this particular assignment gave him
“the creeps.” As he says, “It’s not my cup of tea, taking care of stiffs.”

All the sites on the tour are Platt’s babies, “Distressed properties, “he has resurrected or attempted to
revive over the past two decades. Platt is the King of “distress management in Toronto. He repossesses
and manages financially troubled real estate for banks, trust companies, insurance firms, credit unions
and private mortgage lenders. In bad times, his firm, PHC Inc. profits. Over the last year as the real
estate market collapsed, his company’s revenues have doubled to several million dollars per year. While
firms in most fields are laying off people, PHC has been hiring. The number of employees in Platt’s
distress management division has increased from twenty to thirty-eight.

For banks, trust companies and other major lending institutions, distress management is distasteful
subject with which they would prefer not to be publically associated. Nonetheless, problem real estate
loans are a matter of serious concern to all lenders in today’s economy as numerous owners of homes,
condominiums, town houses, apartment buildings, office towers, shopping malls, restaurants,
warehouses, and raw parcels of land fall into mortgage-payment arrears. The goal of a financial
institution is to prevent a problem loan from turning into a loan loss, where the lender’s money will
never be fully recovered. Which is why they turn to people such as tactful Leon Platt, whose company
motto is: “We handle the nitty-gritty so you don’t have to.” Platt is proud of his track record. “I can’t
think of many instances where we were brought in and the first mortgagee didn’t recover his money,”
he boasts. “With a second or third mortgage, it’s more iffy. You can take your chances. “

3. And his success rate is the reason why most of Toronto’s major chartered banks and trust companies,
dozens of law firms large and small, leading real estate receivers, and foreign investors have all retained
the services of PHC Inc. at one time or another. “When there’s a problem, you call Leon. He’s very
hands-on. He gets his team to look after things,” says Jim Hilton, a commercial real estate lawyer at
Blake, Cassels & Graydon. Hilton has worked with Platt on about twenty-five distressed commercial
properties, ranging in value from $1 million to $4 million. “I first heard about Leon from a few different
sources in the trust company industry. They said that he was a guy who got things done.”

The things Leon Platt gets done range from the mundane tasks of changing locks and fixing roofs, to the
unpleasantness of serving tenants with rent attornments (legal notice to pay rent to the lender instead
of the landlord), to the more fiscally creative (turning an abandoned, dilapidated hotel into a thriving
cottage-country resort). “I can smell what needs to be done,” says Platt.

PHC Inc. is now handling more than a hundred distressed properties throughout Ontario and another
thirty in Atlanta, Florida, and Texas that are casualties to the $500-billion U.S. savings and loans debacle.
(Because of the peculiarities of the legal system, many of the distressed properties PHC handles can’t be
specifically identified). The company has seven branches in Ontario and three in the U.S. The properties
it repossesses and manages on an interim basis range in value from about $500,000 to $30 million. The
exact numbers in PHC Inc.’s distressed property portfolio change almost daily due to the influx of new
business and quick turnaround time on some projects. A job can take as little as twenty-four hours or as
long as four years.

This is the third major recession Platt has participated in, and profited from. He served his
apprenticeship in the recession of 1974, maintaining, upgrading and rehabilitation down-at-the-heels
rooming houses, apartment buildings and bachelorettes. Prior to that, he and his wife gained some
relevant experience by buying and upgrading a few smaller, older apartment buildings. By 1981, Platt
tended to a much broader range of properties and learned the necessity of patience. Turning around a
distressed property in good times is tough enough. In a recession, there are no quick fixes. “We’re
going through the same as in 1981,” says Platt. “There are no buyers now.” In the three months leading
up to Christmas, only a single buyer emerged to purchase one of over a hundred distressed properties
managed by Platt. “Some financial institutions have set up special divisions to handle the high volume
of properties coming through,” he notes. “But many of their staff are new and have never been through
a full market cycle. They have to be guided in what to do.”

There are three critical stages in the distress management process. The first is securing the property.
Patience and tact help to encourage co-operation from an owner whose property is being seized. “You

4. can’t go in as a bully,” explains Platt. “With owners, you have to be tactful. It’s an emotional thing. It’s
like taking part of their life away when you take their assets.” Platt always pays the first visit to the
owner himself and never delegates the delicate task. “I want to get the feel of the situation and see
how much co-operation I will get,” he says. “Each situation is different and the personalities are
different. You have to expect the unexpected.”

The second stage of the process is diagnosing the problem, which is when Platt’s team of investigators
swings into action. The PHC distress management division includes former cops and private detectives,
real estate appraiser and inspectors, property managers, engineers, and accountants who are skilled at
analyzing the techniques of creative financing and know how to separate financial fiction from fact. “I
like to have people with at least 10 years’ experience, says Platt. “This is not a business for amateurs.”
In a recession, many of the problems PHC investigators uncover are easy to explain: for instance,
shopping plazas that fail because tenants go out of business while the surviving retailers demand big
rent reductions or else. But when the economy is strong, more digging is often required to pinpoint
underlying problems. “We see a lot of exaggerated income,” says Platt about situations where the
leases an owner shows to the lender bear little or no relation to the rents that are actually collected.

The third and final stage of the process is devising and implementing viable solutions. For Platt, this is
the most creative and rewarding phase. Sometimes the solutions are quick. “Some property owners
have the resources and stall on their mortgage payments. They like to play games,” explains Platt. “We
rock the boat to the point where if the guys’ got the resources, he pays. “Sometimes, however, a long-
term, radical solution is required.

One such example was a hotel on Lake Simcoe that was virtually abandoned when PHC took it over.
Rather than board it up until a buyer could be found, Platt and company set up a program to upgrade
the property and revive the hotel. They fixed the roof, the mechanical and sprinkler systems, hired a
consultant to set up the kitchen, and ordered linens and mattresses. “The property had been
mismanaged and the owner didn’t budget for a seasonal business,” says Platt, who turned the hotel into
a year-round resort by offering packages tied to outdoor activities that would draw tourists in the off-
season. Brewery sponsorship and promotion of these activities helped to drum up guests. “I opened
up skiing Ski-dooing, and ice fishing competitions,” says Platt. “When we went into the hotel there was
no income. We were able to increase revenues to several hundred thousand dollars a year.” After
about eighteen months the property was sold, the lender was happy and eventually the hotel was
redeveloped as part of a larger resort.

5. Another favorite Platt story involves the turnaround of an office-retail building near Rosedale in the
early 1980s. When we took it over, there were a lot of vacancies and some of the remaining tenants
weren’t paying any rent,” says Platt, who felt the property’s main problem was a poor quality of tenant
not suitable to the area. “This was a prize location, which had a lot of potential. But a goulash
restaurant in Rosedale does not go over.” The turning point for the property, according to Platt, came
with the success of a new, sophisticated restaurant that set the right tone and helped to attract other
quality tenants: “I had confidence in the fellow who started the restaurant. We gave him the first four
months rent-free. I could tell he would succeed. Bank managers look at figures. I look at the attitude a
fellow has.

When PHC staff go out to discuss rent arrears or seize rents from landlords who default on mortgage
payments, they go in pairs and carry beepers in case they need reinforcements. “When you serve an
attornment to tenants, they may get excited and possibly violent. It’s a sensitive area. Our people have
to be able to deal with these situations in a mature fashion,” says Platt, who explains that a visit to an
after hours club, a tavern or a rowdy rooming house calls for much greater precaution than a visit to a
multi-million dollar office tower or shopping mall. He insists that PHC does everything possible to avoid
confrontation and enlist co-operation: “We don’t encourage violence. We’re not bouncers. We don’t
go in and physically throw people out.” But Platt frankly admits he is concerned the image PHC projects
could be alarming to the major financial institutions and large law firms it represents. They don’t want
to be associated in any way with goon tactics or “bouncers,” he says.

Rescuing distressed property in Rosedale may be more glamorous than salvaging rocky real estate in less
privileged areas, but Platt is not one to back off from an interesting challenge. “Leon’s got adaptability
to handle different kinds of problems, “says Jim Hilton on Blake, Cassels & Graydon. For example: to
generate more cash flow at a hotel of questionable refute in the vicinity of Jarvis and Wellesley, Platt
rented out several floors of the hotel to the federal government to serve as a holding centre for illegal
immigrants and defendants awaiting trial, thus guaranteeing a high occupancy rate and a steady cash
flow from a tenant with deep pockets.

Distress management is not the kind of business where you say we don’t do windows. The “windows”
that come Platt’s way can be peculiar. “Once we were stuck with this pig farm near Shelbourne,” recalls
Platt. “What do you do with 5,000 pigs?” Since he know absolutely nothing about running that kind of
enterprise, Platt persuaded the man whose property was being repossessed to continue managing the
operation until a buyer could be found. To ensure co-operation, Platt used his perennial ace card by
reminding the farmer his personal assets would also be at risk: “He could have lost everything.”
Eventually, the property was sold to a large meat packing company.

6. While almost every distressed property has a sad story behind it, some situations are more distressing
than others. A few years ago PHC repossessed a nursing home near Huntsville that had a very low
occupancy rate. Platt and one of his property managers paid a visit to investigate and discovered the
root of the problem when they were invited to lunch: “Their budget for food was a few dollars a day per
person. The owner’s idea of nutrition was peanut butter sandwiches.” Platt and company upgraded the
food, hired more supervisory staff and qualified nurses, and the property was eventually sold to another
nursing home operator.

One of Platt’s toughest tasks came in the early 1970s when he was called in to evict and unfriendly
motorcycle gang from the run-down west-end rooming house mentioned earlier. The former owner,
who had converted an apartment building with twenty-three bedroom units into a sixty-room
bachelorette complex, had trouble collecting rents and walked away from the mortgage. By the time
Platt was called in, the building was in shambles. To avoid further incidents, Platt took his
characteristically tactful approach: “I call it educating the tenants. You explain that they must either
respect the rules of the building and pay rent on time, or leave.” It took almost two months of
explaining (he refuses to elaborate on the nature of how these particular tenants were “educated”) and
a cash settlement (he refuses to say how much) to persuade the bikers to leave. Once they had gone,
PHC cleaned up the building and rented it out to a private college to house high school students from
Asia and Guyana. That worked well for about a year until the school was closed down. Eventually, the
property was sold to a developer and converted from bachelorettes to larger, middle-class apartments.

The biker episode was Platt’s first distress management job and a fitting initiation into the business.
Although Platt had only been physically attacked on the job once or twice, he had been chased by attack
dogs, threatened and had his car defaced. A couple of his superintendents were beaten up by some
pimps, and two tenants respectively set a bonfire and tried to grow marijuana on the concrete floor of a
PHC managed building.

On another occasion, PHC was called in to repossess a commercial plaza in Port Credit. The owner, who
was unwilling to vacate, was sleeping in a bowling alley on the premises, with a guard dog by his side.
He had scared away three bailiffs by the time PHC took on the case. Platt’s operative staked out the
property and outwaited the owner, who finally left, whereupon they changed the locks and secured the
building. Platt prefers to use former cops and private detectives for the most sensitive situations: “They
are very tactful and discreet.”

Platt is well aware of the unusual risks distress management entails but has prospered, in part, because
these risks help to deter competition. For conventional property management companies, he points

7. out, the rewards of handling distressed properties don’t justify the potential risks to their employees,
who aren’t trained to deal with emotionally stressful, often unpleasant and sometimes nasty nitty-gritty
aspects of the profession. While distress management is PHC’s core business and special domain, the
company also manages some healthy properties to offset any drop in the volume of distressed
properties that may occur when economy is strong. “You have to diversify,” says Platt.

Distress management as practiced at PHC Inc. also involves a dress code, which is another preventative
measure. “I usually wear a suit when I visit a property. You have to look respectable. Then they don’t
start swinging,” he explains. “If you wear jeans, they’re ready for a rumble.” PHC property managers
and inspectors follow Platt’s example: “We prefer a blue blazer, tie and grey pants, or a blue suit.”
While rowdy rooming houses gave PHC its foothold, Platt is glad the hurly-burly days are largely behind
him: “We worked our way up. I didn’t want to stay in rooming houses forever. It was risky. People tend
to get upset. A small guy with twenty-two apartments is more likely to panic than a sophisticated
business owner who knows he’s on the hook.”

Although Platt usually acts for large financial institutions, he also manages distressed real estate for
private mortgage lenders. One such client was Manning Roebuck, an old-timer in mortgage brokering
circles. Roebuck was a mortgage lawyer and real estate lender who had a lot of properties and
mortgages go sour prior to and during the 1981-1982 recession. Roebuck had invested funds in first and
second mortgages for his clients, many of them elderly investors. He hired Platt to try to salvage more
than a dozen distressed properties on which he held mortgages and was having trouble collecting rents
after the developer walked away.

“Mr. Platt has a good head on his shoulders and he’s not out to screw you. He gets his fee and he earns
it,” says Roebuck, who still goes into his law office every day at age 89. Platt also offered a sympathetic
ear. “I had to have somebody to talk to,” adds Roebuck. “Otherwise I would have gone nuts. He would
sit down and talk to my clients for me.”


Platt achieved only limited success, however. Roebuck was unable to recover the money invested by his
clients right away because semi vacant properties were not saleable in the depressed real estate
market. “You couldn’t sell a dead cat then,” he says. The only two properties where Roebuck was able
to eventually recoup all the money invested by clients were office-retail buildings on Richmond Street
and Yorkville Avenue. “Mr. Platt kept them fully rented so that we were able to keep up the mortgage
payments,” says Roebuck. The properties were sold for about $3.5 million when the economy

8. recovered. In the other instances, Roebuck lost many millions and had to repay some clients from his
holding companies.

The Richmond Street office building was salvaged by renting out much of the space for television and
film production, theatre and other arts-related activities. The Yorkville property was the site of a late-
night adventure. “I got a call from Manny Roebuck at 1 in the morning,” Platt recalls. “He gets me out
of bed and says, ‘They’re making a midnight move’ – which is when a tenant sneaks away with fixtures,
equipment, machinery, etc. In this case, the tenant was the owner of a floundering restaurant, Platt
picked up Roebuck and they arrived at the scene while a truck was being loaded: “Manny was raising
hell. They saw an 80-year old man yelling, so they left in a hurry. Many kept me up until 4 o’clock that
morning.”

Another property on which Roebuck once held a mortgage was the Nortown Plaza, near Bathurst and
Eglinton. PHC took over the property in 1981 under power of sale. Platt liked its potential so much he
moved his central branch office there: “We filled it up with tenants. The plaza has been very successful
and has been resold once.”

As bad as this current recession is in Ontario, the most explosive growth in PHC’s distressed
management portfolio has been in the U.S., where Platt’s company is managing more than thirty
distressed savings and loans properties. We’ve moved seven of our people down to Atlanta,” says Platt,
who placed one of his most senior and trusted employees in charge, a former private investigator with
fourteen years’ experience at PHC. Platt expects that many properties won’t be sold for at least
eighteen months and that very creative leasing arrangements and incentives will be needed to secure
tenants. Platt says if he didn’t have such strong roots and personal ties in Toronto, he would be
tempted to shift his operations south of the border to capitalize on this “tremendous opportunity.” He
enthusiastically mentions a feature article in Fortune Magazine entitled “The S&L Felons,” which gives
thumbnail sketches of 331 individuals already convicted or indicted for S&L offences.

Distress management is about money, about power and also about ethics. Platt draws his own personal
line at throwing people out of their homes. The sights of a husband laid off and kids crying on the street
is too much. Nonetheless, with the sole exception of repossessing family homes, Platt doesn’t let his
personal feelings interfere with his personal judgement. He is a hired gun, paid to do whatever he’s
legally empowered to do to recover millions or hundreds of thousands of dollars loaned by the country’s
most powerful financial institutions to property owners. Platt doesn’t get paid to help an owner find a
way to hold on to his property – although he occasionally advises a lender to give an owner more time

9. to catch up on payments. One thing is certain: once Platt changes the locks, the property owner says
goodbye to the building.

Platt has compassion, but he certainly doesn’t let it get in the way of doing the job effectively. “Leon’s
sympathetic,” says Jim Hilton. “The average guy can relate to him. He’s not a stuffed shirt in an ivory
tower. But he’s tough in that he won’t budge.” Platt’s first priority is to recover the problem loan for
the lender. Nothing gets in the way of that objective. While he would like to see an owner get back
some of his equity if the turnaround is a success and the distressed property fetches a good price, Platt
concedes there is rarely enough money left over after proceeds of the sale have been distributed to the
lender, the lawyers, the accountants and PHC Inc. He is also quick to remind an un-cooperative owner
he could lose all his personal assets as well if he doesn’t play ball: “It’s in his best interest to work with
us. We find the only owners who don’t co-operate are those who have left the country.”

Distress management is a line of work that calls for a cool head and a no-nonsense approach, says
Michael Kestenberg, a civil litigator and insolvency lawyer who has worked with Platt on various distress
projects. “It’s an area of law and reality that is not experienced by most people. You have to be tough
and fair. If you walk into a place and deal with staff in a fair and responsible manner, they will respond
to you. If you walk in and are an asshole, they will hassle you and subvert your best interests,”
Kestenberg says. “I can send the bailiff in because I believe the client and I have given people enough
opportunity to correct the situation.” Kestenberg, like Platt, feels more sympathetic for distressed
property owners in a recession when mismanagement is less likely to be the main reason for a property
failure: “The sad part is I’m busiest when the economy is bad. There are always people incapable of
managing a business. We are always putting companies into receivership. In good times, it’s generally
because of mismanagement. The unfortunate part is now many people are losing properties through no
fault of their own.”

Unlike Platt and Kestenberg, financial institutions are unwilling to talk about the distress side of the
business. “No financial institution anywhere is going to have a list of the businesses they’ve closed
down become public,” says Kestenberg. Even Platt lets his ambivalence about the financial institutions
he serves show once in a while. He tells a story about a shopping plaza in southwestern Ontario where
one of the tenants happened to be a local branch of a major chartered bank. The bank manager kept
giving Platt the runaround when he asked for the rent. So Platt told the manager he would close the
branch if he didn’t get a cheque by Monday. The caused quite a stir and Platt admits he got a little
carried away, but the cheque did appear promptly Monday.

10. Distress management is, finally, about picking up the pieces of someone’s shattered dreams. “You
always have distress situations. There is always mismanagement of one kind or another,” says Platt,
who is continually surprised and dismayed by the illusions distress property owners put their faith and
money in. As we near the end of his guided tour of the city, Platt tells the story of a man who bought a
hotel in the Wellesley-Sherbourne area. As so many dispossessed property owners are, this man was
inexperienced and had never run a hotel before. In five month’s he spent over $250,000 on renovations
and then lost the hotel because it couldn’t generate enough traffic for him to keep up his payments.
“He had a dream. He wanted to turn this hotel into the Royal York and do a lot of upscale business. He
couldn’t change the clientele in that location. It was rough,” says Platt. “You can’t dream.”

For any more information call L.E. Platt at 416-789-2664