Workout solutions can achieve up to 25% higher return to
funders than a distressed sale
A workout
solution will identify the financial exposure, and propose a plan
to mitigate losses and maximise values from defaulting loans. It is
best carried out by an integrated team of experts.
Our case studies demonstrate that funders can
recover up to 25% higher values from a workout solution.
Typically, a built asset consultant might
achieve this with the funder’s team by reworking the planning
consent, renegotiating planning obligations, repositioning the
assets for alternative tenants and buyers, rephasing, recovering
tax credits, restructuring of finance, reprocurement and stepping
in to take control of the outstanding development.
In some cases, funders can achieve
exceptionally high returns when, following a workout solution, the
improved assets are retained until more benign market conditions
return.
Client Success | Improving
returns by up to 25% against a falling market
The bank commissioned
the EC Harris team when a developer for a $1.5 billion regeneration
scheme breached the loan to value covenant following a collapse of
30% in property values.
The brief was to provide the bank and their
borrower with the most appropriate workout solutions to maximise
returns. The bank was also concerned about certainty of the CAPEX
spend and requested a thorough diagnosis of contractual liabilities
to identify all unplanned future spend.
Creating Solutions
We revised the master plan to add value and renegotiated the
planning obligations to reduce costs. Phase one is now a forward
funded food retail store with a well known operator. The
procurement strategy was changed to fully realise the benefit of
falling tender prices and to avoid risk premiums.
Adding Value
The current site value has been increased by circa 25% over a
distressed sale based upon the original master plan. The cash flow
has also significantly improved and is now self financing due to
the bringing forward of the affordable housing phases.
Key to the success of this commission was the bank’s realisation
that they did not have all the key skills in-house. We deployed a
multi-skilled team, alongside the bank, comprising of development
managers, contract experts, and cost engineers, all led by a
project re-structuring expert.
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