Structured sales can give asset-based lenders actionable insights into the value of real estate in the COVID-19 era, advises Jeff Hubbard, a senior managing director at A&G Real Estate Partners, in a column for ABLAdvisor.com.

“Whether conducted in or out of court, structured sales can be an effective workout solution,” Hubbard, who has 28 years of experience across all real estate sectors, said in the article. “They offer lenders protections that are particularly important in today’s volatile real estate marketplace. Whether conducted in or out of court, structured sales can be an effective workout solution. They offer lenders protections that are particularly important in today's volatile real estate marketplace.

“The College of New Rochelle was a difficult-to-value asset because its future use was unclear. However, the top three bids all came in within $1 million of each other. It was an absolute demonstration to secured creditors of what the property was worth at that time,” Hubbard added.

In the Aug. 24 column, “Certainty in an Uncertain World: Structured CRE Sales Give Lenders Real-Time Data,” Hubbard cites the example of a newly built student-housing complex to illustrate how the crisis can trigger questions about how much an asset is actually worth.

“The appraised value of that building was derived from the pre-pandemic assumption that it would be part of a fully functional college town — a place where students would be crowding into classrooms, sports venues, bars, restaurants and the like for most of the year. How do you put a number on the value of that building in a world of social-distancing and draconian capacity restrictions or outright shutdowns?”

Much the same can be said of offices, shopping centers, hotels, freestanding restaurants and other properties that were appraised prior to the crisis, Hubbard noted, providing a basic overview of the advantages structured sales offer to ABL lenders in today’s highly uncertain marketplace.

In these sales, Hubbard explains, bidders agree to the terms — including due diligence items such as rent rolls, environmental reports, preliminary title commitments and management agreements — up front, as opposed to post-contract.

“Especially in a time of uncertainty, handling due diligence in this way gives bidders a higher degree of confidence,” Hubbard wrote. “It’s a step that bolsters the likelihood of achieving maximum pricing.”

These sales happen faster because the bidders have all agreed to the same set of terms as put forth by the seller — a big difference from conventional deals where disputes over terms can grind everything to a halt late in the game. Structured sales typically result in all-cash offers within 60 to 75 days, Hubbard suggested, with sellers exercising greater control over both the process and timing.