Development-related loans are the most illiquid and difficult to sell assets in the marketplace today and the most likely not to trade due to pricing and expected investor holding period. Mission Capital began advising banks on the sale of these very challenging assets in 2005, long before the words “credit crunch” became prevalent. As such, we have developed a deep understanding of the complexities of selling (and investors interested in) unsold condominiums, partially entitled land and unfinished houses and development projects.
Typically, the primary goal of our Clients is to either reduce exposure to a troubled market or minimize loss on an already defaulted asset. We first advise our Clients to view each loan as a potential investment: if the risk-adjusted NPV for an asset under a workout or REO hold strategy does not exceed that of a loan sale, the institution is best served by divesting the asset. Our Clients have found that loan sales are particularly effective in cases where additional development work/capital is required, where an extended REO hold period is likely or where anticipated future market decline is likely to further impair collateral value. Additionally, our Clients often require strict quarter or year-end deadlines for financial reporting purposes.
Mission first conducts a confidential pre-sale loan by loan analysis and pricing, which is based on actual trades and proven pricing models constructed specifically for acquisition and development loans. Properly priced sales stimulate interest, encourage greater bidder depth, allow for accurate financial projections and create a secondary market for our Clients’ loans. Mispriced sales fail, alienate investors and can reflect poorly on an institution. Mission Capital regularly augments its local and national investor database with adjacent property owners and best-in-class local commercial real estate brokers who register their clients and maximize local participation. We first conduct a competitive indicative bid round to qualify prospective purchasers, analyze their bids and make selection recommendations for multiple final bidders. Mission Capital manages all aspects of the due diligence phase including file imaging/re-stacking, our ShareVault secure electronic due diligence delivery, proactive and ongoing question and answer interaction and pre-final bid negotiation of the loan sale agreement. On the final bid date, multiple bidders submit non-contingent final bids based on their pre-negotiated loan sale agreements. Mission Capital’s process generates multiple post due diligence ready-to-close bids and is the reason for our industry leading ratio of deals offered to deals closed.