The present volume of other real estate owned (OREO) and non-performing assets (NPA) presents an extraordinary challenge to lenders – and traditional solutions do not always apply. Foreclosure actions and online marketplaces often result in inadequate auction bids. Banks with OREO and NPA are often asking more than buyers are willing to pay. However, they often need to maintain their asking price in order to avoid realizing additional REO and loan losses and negatively affecting their overall capital. Attempts to sell the property can often result in additional costs to the bank from removing liens and other expenses.
Real estate investors, including developers and opportunity funds, have a strong combination of the money to invest and the in-depth real estate knowledge and experience needed to buy and maximize the return on OREO and NPA assets. However, their bids for troubled assets are often too low as a result of lack of needed due diligence information, lack of leverage, and uncertainty about the timing of a turnaround for the economy.
Innovative solutions are needed to bridge the gap between the bid price and the asking price for troubled assets. These solutions can include new deal structuring, including joint ventures between banks and real estate investors, refinancing with new equity and loan guarantors, and other creative alternatives. The right deal structure can often minimize further REO write-downs while letting banks share in the upside of any future asset appreciation. Real estate developers and investors may be able to position themselves to participate in opportunities with considerable “upside” potential while getting the returns needed to justify the risk of investing in troubled assets.
How CB&H Can Help
CB&H’s Real Estate and Construction Group, in conjunction with the Firm’s Financial Institutions Group, stands ready to provide a team of industry specialists that understand the extraordinary challenges and opportunities facing lenders (sellers) and investors (buyers) in today’s troubled asset marketplace. Through this fully integrated approach, CB&H’s Distressed Asset Recovery Services (“DARS”) team can deliver the industry-specific knowledge and experience necessary to bridge the gap between the “bid and ask” and to find solutions for both buyers and sellers of troubled assets.
Our DARS team provides both sell-side and buy-side advisory services. We can help lenders minimize risk and maximize return in order to get back to the business of being lenders. We can also help developers and investors find the right “deal structure” to work with lenders in purchasing troubled assets or in joint ventures to complete previously failed development efforts. We have the real estate, transaction, accounting, and tax expertise needed to assist all parties in structuring mutually beneficial solutions, help obtain regulatory approval for favorable accounting treatment, and provide ongoing audit and tax services.
CB&H’s Distressed Asset Recovery Services team offers specialists throughout the Southeast who have extensive experience throughout all phases of the real estate lifecycle – including financing and development, strategic tax planning, and workout services. In addition, our interdisciplinary team of top advisors expands our available depth of specialized resources through affiliations with banking law experts, real estate advisors and lawyers, asset managers, investment banks, opportunity funds, and real estate developers.
Throughout our regional footprint, we have the local real estate market knowledge and expertise to help lenders and investors find solutions to the challenges and opportunities which they face today. From condominiums and resorts to office buildings and golf courses, we can assist in properly evaluating distressed real estate opportunities in order to help choose which workout option will result in the highest net realizable value for all parties involved. Our full suite of specialized distressed asset services includes the following:
Distressed Assets Analysis and Evaluation
Reviewing Portfolio of Distressed Assets
Assessing Potential Value of Real Estate
Evaluating Alternatives for Maximizing Recovery
Conducting Risk Assessments
Identifying and Assessing Potential Joint Venture Partners
Transaction Services
Due Diligence
Deal Structuring Consulting and Analysis
Joint Venture Structuring Consulting
Buy-Side/Sell-Side Advisory Services
Initial Financial Assistance
Refinancing Alternatives
Workout Consulting Services
Debt Restructuring
Foreclosures
Bankruptcy
Liquidation Alternatives
Joint Venture Services
Joint Venture Structuring and Modeling
Accounting for Transfer of Distressed Assets to Joint Ventures
The present volume of other real estate owned (OREO) and non-performing assets (NPA) presents an extraordinary challenge to lenders – and traditional solutions do not always apply. Foreclosure actions and online marketplaces often result in inadequate auction bids. Banks with OREO and NPA are often asking more than buyers are willing to pay. However, they often need to maintain their asking price in order to avoid realizing additional REO and loan losses and negatively affecting their overall capital. Attempts to sell the property can often result in additional costs to the bank from removing liens and other expenses.
