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Struggling economy is booming business for some trades
(The Pittsburgh Tribune-Review Via Acquire Media NewsEdge) Aug. 24--When the economy gets rough, businesses slow down -- unless they're among those that mop up the economic mess.
A Select variety of trades in the Pittsburgh region say they are doing more business in these hard times. They include bankruptcy attorneys, collection agencies, business liquidators and many real estate professionals.
The recent bankruptcy of Boscov's Department Store, for example, fed business to legal and liquidation professionals. The Reading-based retailer, whose attorneys filed a Chapter 11 reorganization petition Aug. 4, engaged a liquidation specialist to conduct store-closing sales last weekend at 10 of its 49 locations, including stores in Monroeville and Bethel Park.
"There is more distressed activity in retail and consumer products" companies, said Gary Kulp, a division co-president at Gordon Brothers Group, Boston, one of the two liquidators helping Boscov's reorganize. "We are finding increased activity in commercial and industrial distressed situations, too."
Business bankruptcies and personal bankruptcies have spiraled upward over the past two years, as the housing and credit crises have snared the economy.
Business bankruptcies have spiked 65 percent in Western Pennsylvania, from 74 in first-quarter 2006 to 122 in first-quarter 2008, according to figures from the American Bankruptcy Institute. Nationally, the rate more than doubled.
"In times like this when we're clearly in a downturn and people are hurting, firms like ours are very busy," said Robert Bernstein, head of the Bernstein Law firm, Downtown, which represents creditors.
Bernstein's brisk bankruptcy business in recent months caused it to add a ninth attorney last month, with a 10th one soon on the way, Bernstein said.
Personal bankruptcy attorneys are hopping in these hard times, too. The 2,028 cases filed in Western Pennsylvania in first-quarter 2006 jumped almost 50 percent to 3,001 two years later. The national rate, again, more than doubled.
"Our business is definitely up, in the low double digits, over last year in terms of the number of cases and in terms of calls," said attorney Ken Steinberg, of Steidl & Steinberg, Downtown.
Personal bankruptcies ballooned because of the sagging economy plus other factors. Nearly one-fifth of his firm's clients are "pushed over the edge," he said, by adjustable-rate mortgages whose rates spiked drastically in just one or two years.
Steinberg said one couple's mortgage rate adjusted after the first year such that their payment soared from an initial $700 a month to $1,400. Such fillings caused his firm to double its support staff to 10 from five within the past three years.
Business liquidators/auction houses also are busier. Such companies are called in, usually by lenders, to appraise a distressed company's equipment, real estate and other property, and then arrange and conduct auctions to fetch as much money as possible.
"The last year has been particularly strong, due to the change in the economy," said Stan Davis, CEO of Harry Davis Co., Uptown, a third-generation liquidation company that is Pittsburgh's largest.
For example, Davis on July 31 auctioned off a host of industrial drills, lathes, grinders and other equipment of O'Brien's Machine & Welding, Ben Avon, which had folded after more than 20 years.
"That was a nice little shop. But job shops are a competitive industry, and the order backlogs were really off," Davis said.
Davis also presided over three, local car-dealer liquidations since May -- part of "a consolidation of the automobile businesses in this economy right now," he said. Davis auctioned equipment and other property of Bob McCrackin Ford in Ross, Biondi Parkway Ford's Wilkinsburg location and Don Allen Auto City, Bloomfield.
Many business are reassessing their real estate in this struggling economy. That generates business for real estate appraisers, but even more stems from distressed residential property, Davis said.
Business volume at his appraisal division "is through the roof these days," Davis said. His company auctioned off distressed, high-end homes in Fox Chapel and Ligonier this month.
Distressed homes, or those threatened with possible foreclosure, are keeping Coldwell Banker busy these days, said Tal Crandall, an associate broker/manager at the McCandless office. He's doing more "short sales," when a lender accepts a buyer's offer lower than what's needed to pay off the seller's mortgage in order to avoid a protracted and costly foreclosure.
"We're running into that more than I've seen in the past, and I've been in business about 20 years," Crandall said.
The higher deal flow, however, doesn't translate into higher income for Crandall or his office. It met its 130-unit sales goal last year, but the total sales volume was $6 million lower than targeted.
"We're extremely busy here," he said. "But it's from a unit-volume standpoint, not a dollar-volume standpoint."
The same is true for collection agencies. United Mercantile Co. of Pittsburgh in Hampton, which collects debts from businesses, is somewhat busier, "but you might not get as much income because the claims are not as collectible," President Roger Devonshire said.
"It's better during transition times, when you're going into a recession or coming out of one," he said.
Agencies that collect from indebted consumers likewise are pursuing more people but whose average payments are lower than during a healthy economy. Credit Management Co. in Green Tree is pulling less money from debtors owing money to its hospital, utility, college and taxing-authority clients, said marketing director Melissa Zurich.
"Someone who was paying $100 a month two years ago we might have to put on $50-a-month (plan) now to make it more affordable," she said. "That lowers the income coming in to us."
But the "repo man," surprisingly, is not doing more business these days. Several of them said their business volume remains flat to down.
"There's a big misconception that repossession businesses are flourishing because the economy is bad," said Dave Vickers, president of Abby Recovery Agency Inc., North Versailles.
"May and June were the worst months I've ever had in my 20 years in business," he said. "And that's definitely due to the economy."
Vickers and other repo pros said that in a down economy, banks make fewer loans for houses, vehicles and boats, and are more stringent in screening applicants. That means there's fewer borrowers to turn into deadbeats with property to be repossessed.
"When the economy is good, you have a lot more people making purchases, which accounts for more repossessions," said Pete Miller, president of American Recovery Corp., McKeesport. "I've been in the repossession business 30 years, and have never seen it go up or down more than a few percentage points."
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Copyright (c) 2008, The Pittsburgh Tribune-Review
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