Investing in Distressed Real Estate Opportunities

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Investing in Distressed
Real Estate Opportunities
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Realising opportunities in challenging times
In this challenging economic environment,
recognising and capitalising on the next
opportunity is crucial. The growth of
distressed real estate situations may offer
valuable investment opportunities in real
property or real estate backed debt.
However as real estate backed debt structures have become
complex and highly specialised, how do you make the right
investment, understand and manage the risks and structure
investments efficiently?
Deloitte has a deep understanding of the real estate
backed debt market. We have teams of specialists who
can assist you to assess when and how to invest in
distressed real estate backed debt opportunities.
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When?
How to identify where opportunity lies
Our global debt advisory, structured finance, reorganisation services,
tax and audit practices have extensive knowledge and expertise in the
real estate and real estate backed debt arenas.
Our practical experience means we are well placed to give
commercial insight into where and how value may be
created. We have in-depth knowledge of the full spectrum
of debt structures from the straightforward to the highly
complex. We have significant experience in the following
specific areas:
Understanding the lender
We have a good understanding of the mindset of banks,
institutional and private lenders in the current environment.
We know how each class of lender is dealing with its own
liquidity and regulatory pressures and the impact this has on
their decision making process in respect of potential divestments.
Understanding the market
We have in-depth expertise in all segments of the global debt
markets, from straightforward bilateral bank facilities to complex
securitised structures, and the global real estate market.
Understanding the product
We can advise on the performance of the underlying real
estate, where the value will break in more complex note
issuances, and how value can be realised.
Understanding the borrower
We have extensive real estate borrower-side experience,
allowing us to advise on the key business issues facing the
borrowers who are ultimately servicing the debt.
Realising the opportunity
We have extensive experience advising on and executing
solutions for existing debt structures, including complex
multi-country and multi-lender scenarios.
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How?
Managing risk and efficient structuring
Managing risk
Once the opportunity has been identified, it is critical to
understand and manage the associated risks. Distressed
real estate backed debt structures have unique issues and
investing in such structures necessitates an understanding
of specific areas including:
Efficient structuring
It is important to implement a structure which delivers the
desired commercial outcome and tax efficient returns.
• the objectives of all stakeholders in complex debt
structures;
• origination and underwriting standards and procedures;
• valuation assumptions and methodologies;
• the credit rating process;
• the associated financial risks;
• withholding and historic tax risks, often across multiple
jurisdictions;
• borrower viability and borrower level tax risks; and
• how to account for such investments.
• consideration of a tax efficient acquisition structure which
meets investor, vendor and borrower requirements;
• minimising any withholding tax leakage and tax on gains;
and
• minimising VAT costs.
Structuring for investment in real estate backed debt would
include:
Deloitte have established global teams who have technical
and industrial expertise in real estate structured finance.
We have recently provided transaction support to a number
of clients on commercial loan acquisitions of a variety of
real estate backed portfolios, including performing and
non-performing loans.
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Who?
Key Deloitte contacts
Debt advisory
Reorganisation services & debt structuring
Financial and tax due diligence/structuring
Fenton Burgin
+44 (0) 20 7303 3986
fburgin@deloitte.co.uk
Neville Kahn
+44 (0) 20 7007 3017
nkahn@deloitte.co.uk
David Stark
+44 (0) 20 7007 2536
dstark@deloitte.co.uk
Mark Goodey
+44 (0) 20 7007 0851
mgoodey@deloitte.co.uk
Lisa McNulty
+44 (0) 20 7007 2979
lmcnulty@deloitte.co.uk
James Douglas
+44 (0) 20 7007 4380
jamesdouglas@deloitte.co.uk
Nigel Shilton
+44 (0) 20 7007 7934
nshilton@deloitte.co.uk
Robert Young
+44 (0) 20 7007 2571
robyoung@deloitte.co.uk
Dominic Graham
+44 (0) 20 7007 2043
dograham@deloitte.co.uk
Philip Mills
+44 (0) 20 7007 8602
pmills@deloitte.co.uk
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