Distressed Out or In?
Public home building companies keep on impairing the owned land pipeline that is on their books; privates battle the slippery slope of owing lenders more on land they own than what it’s worth today. Talk about distressed assets! And the thing is, even the bargain hunters with cash and capital horded up right now as “dry powder” have been paralyzed by the swan dive in land values.
For a glimpse into where potential distressed asset opportunists–the vultures–may be looking to embed their talons, have a look at this video from The Deal.Com.
At the TMA/The Deal’s Distressed Investing Conference in January, Rothchild’s David Resnick, Cerberus Capital Management LP’s Kevin Cross and KPS Capital Partners LP’s David Shapiro discussed the opportunities and challenges for strategics investing in distressed assets. – Maria Woehr
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I would strongly disagree that those who are addressing the ever-growing issue of distressed assets are opportunists. Partially completed residential development and land assets lose value in real time. Unless experienced professionals with in-depth local experience are willing to manage these assets only then can the attributes of value that exist beyond the surface, elements such as potentially expired entitlements and development agreements, zoning and master plan considerations, partially completed horizontal and vertical developments, utility availability and neighborhood sentiment concerns, to name only a few be addressed and the value freefall be contained. Money to invest may be provided on the macro scale, but the asset value can only be maximized by development professionals on the ground in that market. We really believe “it’s all in the execution,” and extracting value from an asset that has recently suffered a significant value shift is only going to be accomplished by people with tried and true development expertise and local knowledge on an asset-by-asset basis. This local knowledge is critical to further analyzing and establishing the potential value of a parcel of land or project in some stage or another of development. Investors with money to complete a project and the local expertise to do it well can save a project from a value drop that will impact all real estate in the vicinity.