Creating value through real estate restructuring, active asset and property management, and strategic disposals. December 2012

Transcription

1 Creating value through real estate restructuring, active asset and property management, and strategic disposals December 2012

2 1.0 The need for banks to restructure Bad banks are typically external institutions that are operationally separate from the original bank, or internal virtual entities charged with winding down ring fenced portfolios of bad or non-strategic assets. The aim of the bad bank is to help an institution under stress to rebuild trust by clearly segregating weak/ bad assets from the rest. This arrangement: Provides transparency into the core bank s performance, Rationalises and restructures the balance sheet, Accelerates the deleveraging process, Reshapes the business model, and Improves the economics of the wind-down portfolio.

3 1.1 Examples of wind down operations

4 1.2 Notable bad banks currently active

5 2.0 Parameters of real estate restructuring A. Portfolio wind down Wind-down strategy Portfolio sales Workout of assets Asset-liability management and funding B. Operating model Organisation Outsourcing People & Incentives Data quality & IT C. Regulatory strategy and communications Banking license and legal status Stakeholder management

6 2.1 Key steps in executing the strategy Based on the desired wind-down pace and the amount of capital provided to absorb the deleveraging losses, the bad bank must develop its wind-down strategy, with all of its assets sorted into clear categories. Immediate action: Fix urgently: Identify assets that have to be restructured in the short term, in preparation for a potential exit in a better market environment. Prepare for sale: Dispose of highly capital intensive assets which pose a significant risk from further expected credit deterioration. Medium to long-term action: Run off naturally: Identify and progressively dispose of medium-term performing assets that do not consume much capital and which are deemed likely to generate returns if allowed to mature without intervention. Hold in hope: Highly illiquid long dated assets that may require a massive haircut if sold or incur a large cost to restructure. Wait for markets to turn for these assets...don t just react; prioritize and manage actively

7 2.2 Establishing the bad bank

8 2.3 Analysing real estate assets Map real estate situation costs, lease terms, location types, rents and service charges Operating costs for each location Valuation details for owned properties and estimated rental value for leased locations Map locations asset base, income and operating costs Identify opportunities for value realization re-negotiation, alternative use Data quality is of utmost importance as it allows effective portfolio management, support decision making, and facilitate in successful and fast portfolio sales

9 2.4 Maximizing value via real estate NPL restructuring

10 3.0 Leaf Research - Company profile A leading real estate consultancy firm, providing high quality real estate market research, valuation, feasibility studies, financial modelling and strategic consultancy. The company employs Chartered Surveyors, Chartered Accountants, Economists, Statisticians, Engineers and Town Planners, and handle complex projects that demand a multifaceted approach and skill set. Leaf Research was the first company in Cyprus to be Regulated by RICS and to register under the RICS Valuer Registration Scheme. Leaf Research has a number of local and overseas associates who provide experience and expertise through their specialist services and global networks. A multifaceted service offering, having data gathering and analysis at its core.

11 3.1 Leaf Research - Track record Larnaca Golf Course and Country Club Valuation and business plan of a proposed international standard golfcourse development in Tersefanou, Larnaca. Sunrise Pearl, Protaras Marco economic review, viability study, and property valuation for a new five star hotel & spa resort in Protaras. University of Central Lancashire (Cyprus) Feasibility study and financial model for the proposed development of a private university and halls of residence in Pyla, Larnaca. Market research, & Asset repositioning Property market review and viability study for a niche high-end residential development in Pegia, Paphos. Policy document Compiled a strategy document outlining Hellenic Bank s policy regarding the use of alternative real estate for collateral purposes. Valuation & Forecasting services Financial review of loan agreements and assets during PIMCO s audit of Cyprus banking system. Market research and forecasting data regarding the national market and local submarkets. Experience across sectors and with landmark projects

12 4.0 Leaf Research & real estate restructuring Project manage the creation of the bad bank. This process would entail: 1. Review of all loans and loan collateral (property and other), 2. Validate & update all relevant documentation and verify that record keeping is in compliance with regulations, 3. Compile a database with the above information in order to have a single point of access that is updated live, 4. Review the assets and establish a high level strategy, identifying specific classes or assets that are to be managed in a different manner, 5. Initiate disposals and manage active workout of loans and of assets. Execution: Data gathering. Strategic review. Asset disposals. Loan workouts.