Why it pays BIG… to investigate. Fisher Island Case Review

Mr. Smith was a savvy real estate investor and seasoned developer. He used his experience and wealth to land himself onto one of the most exclusive islands in the US, Fisher Island.

The likes of Oprah Winfrey and Mel Brooks are among the many celebrities with homes on the Island. It’s high-class and represents one of the wealthiest zip codes in the U.S.—accessible only by a short ferry or yacht ride from South Miami Beach. This private residential island community is known for beautiful sunsets, soothing warm water, and coconut-filled palms and mangroves. It is set against views of the Atlantic Ocean and the colorful iconic Miami skyline.

Mr. Smith had bought and sold hundreds of properties over 40 years. He developed land and communities, and was very successful. His family even followed in his footsteps and also entered the real estate business.

For unknown reasons, Mr. Smith stopped paying his mortgage. He gave every indication that he was insolvent and on the surface it seemed to be true. After years of fighting, the mortgage was finally sold to our client. Our client specializes in the distressed residential real estate sector—those problem properties that other portfolio firms stay away from.

During negotiations, Mr. Smith wanted to buy back the property from foreclosure for only 10 cents on the dollar. Our client knew the property was worth a considerable amount more and decided to get Pilum involved.

After investigating for a month, we uncovered several properties and businesses that Mr. Smith owned. We found a considerable amount of cash in business accounts and personal accounts, as well as the rental cash he was receiving on all his investment properties. Some other assets we found were multiple vehicles, water craft, and even land that was owned by him.

As we looked deeper into Mr. Smith’s records, we also saw an emerging pattern. During the time period of “insolvency”, Mr. Smith transferred most of his wealth to his family. It became more and more evident that he was by no means broke. His family was also wealthy and we collected the documentation to prove it.

Because we were armed with this information, our client cut off communication with Mr. Smith and his attorney. They proceeded to foreclose without any intent to negotiate a deal. The power finally shifted to our client.

After a few months of non-negotiation, Mr. Smith’s lawyer finally responded, “Who shall we make the check out to?” After the dust settled, it seemed to be that the unknown reasons for stopping payment was actually strategic in nature.

Fisher Island’s inaccessibility to the public and uninvited guests, exclusiveness in providing privacy, and refuge and quiet retreat for its residents was something Mr. Smith was attached to. The prestige and the perception of living on the Island was too great to loose.

At Pilum, we understand that asset investigation is an art form. It’s all about the analysis, attention to detail, and connecting the dots. It takes pain staking time to go through hours of dull documents and government indexes—while carefully reading those documents in their entirety to find proof on the answers needed. Recognizing the sometimes insignificant bits of information to solve the big puzzle is what separates the great investigators from the good ones.

Before we were hired, our client was more than willing to settle on a 30% return on investment. In the end however, Mr. Smith wrote a check for 300% of the amount that our clients bought the property for; a six figure return on investment. In Mr. Smith’s defense, he still bought the property back from foreclosure on exactly the amount he owed. It was still a million dollars under market value, but a far cry from 10 cents on the dollar.

While the name and certain facts were changed to protect the debtor and the client on this case review, this story is a true story.

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