Distressed Asset Acquisition & Bid Enhancement

At Dimension, we empower our clients and partners with a material competitive edge in acquiring distressed assets and position them to pick off some of the best assets on a negotiated basis by becoming the "buyer of choice" among lenders holding such assets. We accomplish this by combining affordable equity with an interdisciplinary problem-solving approach towards the unique challenges facing distressed sellers.

Today, many banks and public real estate investment companies hold on to their troubled real estate assets to postpone the recognition of losses or in the hopes that eventually rising values will mitigate their losses. Hence, the volume of commercial real estate transactions remains far below normal levels. Contrary to original market expectations, only a relative trickle of distressed assets has been offered for sale – mostly the market dregs – while investors remain on the sidelines waiting for a flood of assets that may never come.

This stalemate is indicative of a gap between the "bid and ask." Lenders' balance sheets are swollen with REO and non-performing loans because they believe the intrinsic value of their real estate is greater than market prices. Investors, after raising billions of dollars in equity predicated on achieving returns of 20-25% or more have invested only a fraction of their committed capital. Transaction levels will not increase until sellers lower their prices and/or buyers lower their yield requirements.

This market is rife with sellers who have mispriced their assets and buyers who have mispriced their equity. Collectively they have not closed the bid-ask gap.

When targeting a specific acquisition or restructuring assignment for a client, Dimension takes an interdisciplinary approach to construct an enhanced bid. Dimension has developed substantial expertise in structuring complex transactions utilizing our knowledge of tax, accounting, and bankruptcy. Where appropriate, we augment our team with professionals from "Big Four" accounting firms with expertise in bank regulatory accounting, GAAP and IFRS accounting and tax working in concert with law firms possessing deep experience in bank, tax, real estate, REIT, securities and bankruptcy law.

We have designed proprietary structures to bridge the bid-ask gap and exploit the recent adjustments in mark to market accounting rules as well as arcane bank regulatory accounting to "unlock" these assets from lender balance sheets and allow our clients to acquire the economics of distressed real estate while mitigating write-downs to the financial institutions.

Dimension combines these proprietary techniques with new equity to complete the transactions.
 

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