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Bankruptcy Sales: The Sound of Opportunity Knocking

National  + Weekender  | 

It’s been said that every economic downturn looks different, and therefore will present different investment opportunities—or not, in the case of the wave of distressed real estate that never quite reached shore during the Great Recession.

In the current environment, opportunistic real estate investors will increasingly turn to Section 363 bankruptcy sales, said Jeff Hubbard, senior managing director of the structured investment sales division at A&G Real Estate Partners, during a recent webinar sponsored by law firm Herrick, Feinstein LLP.

When it comes to taking advantage of the investment opportunities in bankruptcy sales, Hubbard pointed to a key difference between the Great Financial Crisis and the economic challenges triggered by COVID-19. “The positive thing about the market today is, you have plenty of liquidity and available credit generally, unlike in 2008,” he said. “So investors will have the money to pursue deals.”

Furthermore, in a world now marked by uncertainty, all parties of interest—from buyers, debtors and courts, to secured and unsecured creditors—are seeking certainty, Hubbard told the audience.

“Bankruptcy sales, precisely because they are so carefully structured, give you exactly that with respect to key factors such as timing and market value,” he said. “It’s why I’m advising real estate investors to look to the bankruptcy process for available opportunities across all asset classes.”

The webinar was titled “Seize the Opportunity: Real Estate Sales Under Bankruptcy.” Hubbard, a nationally recognized expert on structured sales, inside and outside of bankruptcy, joined a panel from Herrick that included Sean E. O’Donnell and Stephen Selbst, co-chairs of Herrick’s restructuring & finance litigation group; and Belinda Schwartz, chair of its real estate department.

The discussion focused in particular on 363 sales, named for Section 363 of the U.S. bankruptcy code. The Herrick attorneys and Hubbard discussed the impact of COVID-19 on retail, education and other sectors and covered the value-maximizing attributes of the Section 363 sale process from the perspectives of borrowers, creditors and outside investors alike.

“We went over basics such as stalking horse bidders, how to avoid valuation disputes—or win them when they occur—and the logistics and strategic imperatives involved in discovering opportunities in the bankruptcy process,” said Hubbard.

In the webinar, Hubbard emphasized that structured sales offer greater certainty both inside and outside of bankruptcy. While the stalking-horse bidding process typical of a Section 363 bankruptcy sale provides a “floor” that protects debtors from receiving unreasonably low bids, Hubbard noted, that any structured real estate transaction tends to yield valuable benchmarking information.

“You get an instant read of the market by receiving multiple offers all at once,” he explained. “At a time when the value of a wide array of assets—everything from retail leases, to excess real estate on college campuses, to office properties—is in question, that is critically important.”


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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

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