A worthy anecdote from the front lines of distressed real estate deal making by Joshua Kahr at Kahr Real Estate. He discusses the importance of relationships and deal structure in a successful transaction:
[…] if a deal could be structured in a way in which a bank could receive more today for a defaulted note or an asset than they would otherwise receive by the investor by bringing in bank as a partial owner in the purchasing entity, this might help to better align the goals of the investor and the bank. In addition, the lender will often finance the new vehicle as a way to boost the overall sales price and mitigate taking a loss today. This process can be beneficial to both parties, because it allows the investors to reduce the equity commitment while providing the bank with a higher price today on paper. In addition to providing some percentage of the equity, a deal could be structured in which the investor must achieve a targeted rate of return prior to a bank receiving any part of its equity back.
A happy and healthy new year to you!
