With respect to investment opportunities in bankruptcy sales, Hubbard pointed to a key difference between the Great Financial Crisis and the economic challenges triggered by COVID-19. "The positive thing about the market today is, you have plenty of liquidity and available credit generally, unlike in 2008, so investors will have the money to pursue deals."
Moreover, in today's highly uncertain environment, all parties of interest—from buyers, debtors and courts, to secured and unsecured creditors—are seeking certainty, Hubbard told the audience. "Bankruptcy sales, precisely because they are so carefully structured, give you exactly that with respect to key factors such as timing and market value," he said. "It's why I'm advising real estate investors to look to the bankruptcy process for available opportunities across all asset classes."
The webinar was titled "Seize the Opportunity: Real Estate Sales Under Bankruptcy." Hubbard, a nationally recognized expert on structured sales, inside and outside of bankruptcy, joined a panel from Herrick that included Sean E. O'Donnell and Stephen Selbst, both Partners and Co-Chairs of the Restructuring & Finance Litigation Group; and Belinda Schwartz, Partner and Chair of the Real Estate Department. At A&G, Hubbard's team boasts 80-plus years of experience in structured turnkey dispositions of portfolios and individual properties across all asset classes.
The webinar focused in particular on 363 sales, named for Section 363 of the U.S. bankruptcy code. The Herrick attorneys and Hubbard discussed the impact of Covid-19 on retail, education and other sectors and covered the value-maximizing attributes of Section 363 sale processes from the perspectives of borrowers, creditors and outside investors alike. "We went over basics such as stalking horse bidders, how to avoid valuation disputes—or win them when they occur—and the logistics and strategic imperatives involved in discovering opportunities in the bankruptcy process," related Hubbard.
For investors, those imperatives include doing a deep dive into the nuances of the bankruptcy process and obtaining proper representation, the executive noted. "It's important to educate yourself on the nuances of 363 sales, but you also want to make sure you're represented by experienced bankruptcy counsel," Hubbard said. "Having representation is important, because when advisors are evaluating potential bidders, one of the first questions they ask is whether you're represented by counsel. They want to know that you have credibility—that you fully understand your obligations in a structured bankruptcy sale."
Hubbard emphasized that structured sales offer greater certainty both inside and outside of bankruptcy. While the stalking-horse bidding process typical of a Section 363 bankruptcy sale provides a "floor" that protects debtors from receiving unreasonably low bids, Hubbard noted, any structured real estate transaction tends to yield valuable benchmarking information. "You get an instant read of the market by receiving multiple offers all at once," he explained. "At a time when the value of a wide array of assets—everything from retail leases, to excess real estate on college campuses, to office properties—is in question, that is critically important."
Last year, A&G sold the main campus of the College of New Rochelle (New York) in Westchester County for $32 million in a structured bankruptcy auction. Even then, the market value of the 15.6-acre property was uncertain, due in no small measure to a serious constraint in play—the preferences of city officials and local community groups regarding how the campus could be reused. "We had three parties all bid within $1 million of each other," said Hubbard. "It was real-time price discovery—an absolute demonstration of what that property was worth when marketed properly."
About A&G Real Estate Partners
A&G is a team of seasoned commercial real estate professionals and subject matter experts that delivers strategies designed to yield the highest possible value for clients' real estate. Key areas of expertise include real estate due diligence, valuations, dispositions, lease restructurings, acquisitions, structured investment sales, and facilitation of growth opportunities. Utilizing its marketing knowledge, reputation and advanced technology, A&G has advised the nation's most prominent retailers and corporations in both healthy and distressed situations. Founded in 2012, A&G is headquartered in Melville, N.Y., with offices throughout the country. For more information, please visit: http://www.agrep.com/
SOURCE A&G Real Estate Partners