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Rochester Top 100: Investment firm gets success from distress

Rochester Business Journal
June 21, 2013

Perinton-based investment firm Midwest Inc. does not expect to see another 95 percent spike in revenue anytime soon.
Rather, Midwest is counting on slow and steady growth in the coming years, President Timothy Sheehan said.
The huge increase occurred in 2011 as the global economy healed from the 2008 recession. Revenue increased 15 percent in 2012.
"I don't think we're going to have these sort of near-doubling of revenues year over year like we had in 2011," Sheehan said. "I don't see that in the near future. But the 10 to 20 percent growth would be ideal. We're going to be looking for more sequential, incremental growth.
"That time period-late 2010 into 2011-was a coming out of the financial crisis and was a big opportunity for businesses like ours to grow."
Midwest is a specialized investment company, said Sheehan, a native of Dutchess County in the mid-Hudson Valley.
"We invest primarily in distressed assets, primarily commercial loans," he said. "We'll do the due diligence on them, underwrite them, purchase them, and then we manage those investments for ourselves and a small group of outside investors."
Much of Midwest's loan portfolio is the result of buying commercial loans from banks.
"From time to time, banks sell commercial loans," Sheehan said. "It could be through acquisitions or other expansions. They might have too much of a concentration in a particular asset class or geography, and they might want to relieve themselves of an asset class.
"A bank might acquire another bank," Sheehan said, "and all of a sudden they have too much of a concentration, for their math, in limited-service hotels."
That bank might then decide to sell $100 million of its loans in this asset class because it does not want to have that much of a concentration in that particular asset, he said.
Midwest is often happy to accommodate.
"We're mostly looking for loans we think, with some restructuring or additional time, there's good underlying businesses that can pay it back," Sheehan said. "They might just need a lower interest rate, or maybe more time. And the seller, the bank, might not have the patience."
Midwest and other investment firms will examine the available portfolio and place a bid.
"We're trying to offer the best price we can because we have competitors, but we need to make money as well," Sheehan said.
Sheehan declined to provide specifics on his company's revenues or profits.
Midwest employs 46 people. That includes 37 banking and legal professionals in the Rochester office.
Seven due diligence and underwriting employees are at predecessor company Midwest Financial Acceptance Corp. in Kansas City, Mo. Two are employed in San Juan, Puerto Rico.
"Our team that sources and underwrites new portfolios is based in Kansas City," said Joseph Lovenduski, who founded Midwest Financial Acceptance nearly 25 years ago. "But all of the asset management-financial, legal, servicing and reporting functions-are in Rochester."
Upon launching Midwest Financial Acceptance, Lovenduski enlisted a predecessor to Phillips Lytle LLP in Rochester to serve as legal counsel to the company. He later hired five lawyers from Phillips Lytle, including Sheehan in 1999, rather than pay the retainer.
"They were working in an office in the Chase building for Midwest Financial Acceptance Corp.," Lovenduski said. "We got together and started talking about starting a new company."
Midwest Inc. was founded in 2000 and has handled all the new business since then.
"It's a national business," Sheehan said. "Banks are selling all around the country. It's not a business that you can survive on just locally.
"For the most part, the real estate market here has been very stable and the business environment has been stable. There haven't been as many distressed assets in the Rochester area as you might see in the Southeast, the Southwest or the Midwest."

The Rochester Top 100 program is presented by the Rochester Business Alliance Inc. and KPMG LLP. Launched in 1987, it recognizes the fastest-growing private companies in Greater Rochester. This year's Rochester Top 100 event will be Nov. 6. For more information, go to

Midwest Inc.
A specialized investment company that focuses primarily on distressed assets.
2012 ranking: 13
Founded: 2000
Location: Perinton
Top executive: Timothy Sheehan, president
Employees: 46

6/21/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email

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