Wednesday, February 11, 2009

Feature: How Deals are Getting Done

On Monday, we featured Jason Friedland of Iron Stone Real Estate Group, who offered his take on the bid-ask differential between buyers and sellers. Today's post is Jason's follow up commentary on how Iron Stone sees deals getting done in today's environment. Please give us feedback via the comments section below the post. Enjoy!

We work with banks and lenders directly to discuss troubled debt or portfolios of REO properties. In many cases, we've found that banks are seeking a better price by negotiating directly with large, well-capitalized investors rather than taking the risk of a public auction or bidding process. At the same time, an investor with cash in hand can close quickly, allowing a swift resolution for the seller. But banks are not the only ones competing for these liquid dollars. Hedge funds and private capital funds also wish to sell portfolios that were picked up in the rising market and which now need to be cut loose.

The acquisition of performing and non-performing debt requires market knowledge, specialized legal and financial expertise, property development capacity, and access to capital that are necessary to pursue distressed asset and debt deals successfully. We are seeing deals structured a variety of different ways, but our principal focus now is on acquiring senior mortgage positions with the potential to eventually control the real estate and create value by repositioning the asset.

In turbulent markets, it may seem that new potential buyers crop up on a weekly basis. But how can banks and other financial institutions find qualified buyers for distressed assets? Beyond the obvious qualification of having the capital to complete the transaction, sellers have begun to realize the necessity of engaging a buyer who will close – not hedge, prolong due diligence, stall, and walk away. The buyers who can close are the ones with the real estate expertise to redevelop and reposition the property for the best chance of success. This is our company’s bread and butter, and while we continue to exercise patience and discipline, we look forward to the opportunities that are sure to present themselves in the months ahead.

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