Effective management of distressed assets

How do you manage distressed assets?

Today, the need for landlords, landowners and property investors to generate maximum returns from their assets is increasingly important, whether that asset is a large-scale shopping centre or rural estate, single asset or full portfolio. But what happens when a property management instruction involves distressed assets?

Essentially, the key difference when handling a receivership portfolio or singular distressed asset is dealing with the unknown. There can often be poor handover information and/or a lack of legal documentation which needs to be overcome and managed from the outset if a property is to be transformed into a product that the receiver can sell. It is also crucial to ring-fence the rental income to ensure that there is no leakage to the previous agent or borrower.

The management of distressed assets is time intensive and demands the ability to deliver an instant appraisal of the situation to ensure the property and income is safeguarded. Tenancy schedules can often be found to be out of date, with key dates/rent reviews and even complete tenancies missed. Our role is review the data and then use this data to ensure the portfolio is as clean as possible, enabling the Insolvency Practitioner to sell the property for best possible value with minimum fuss.

This was the case at a distressed retail site that formed part of a large portfolio instruction that Savills was recently appointed to manage. On handover, information provided was found to be inaccurate, which presented immediate obstacles and challenges. Savills implemented a strategy to re-establish fundamental management systems, which included regularising the occupation of traders by putting in place licence agreements and coordinating the rent collection, overseeing and executing a health and safety regime and working through the outstanding compliance issues.

Measures such as these contribute to the overarching objective of any distressed asset project: reducing the uncertainty around the asset(s) and therefore perceived risk. Whatever the mix of initiatives employed, this allows potential purchasers to gain a clear understanding at the point of sale of what they are buying and helps ensures the best price is achieved. 

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