Real Estate: Source of Liquidity in Corporate Buyouts, Restructuring and Insolvency

1
Real Estate Source of Liquidity in Corporate
Buyouts, Restructuring and Insolvency

• THE TAURUS EXPERIENCE

German Distressed Property Risks and
Opportunities November 9-10, 2005 Berlin, Germany
2
Stages of Mortgage Default and Subsequent Outcomes
Source Ciochetti, Tony and James Shilling(2002).
The Post Foreclosure Performance of Commercial
Mortgages. Presented at University of Southern
California Lusk Seminar, March 29, 2002.
3
The Debate

• The prevailing opinion losses are temperate
  (see, e.g., a study by Deutsche Bank (1999))
• Ciochetti et al default losses in financially
  distressed commercial mortgages (including
  foregone interest) average 66.1 percent

Source Ciochetti, Tony and James Shilling(2002).
The Post Foreclosure Performance of Commercial
Mortgages. Presented at University of Southern
California Lusk Seminar, March 29, 2002.
4
Results of the Study

• Combined gross loss recovery is found to average
  slightly greater than 65,
• Recovery net of foreclosure and operational
  costs, including accrued interest, slightly under
  40.

Source Ciochetti, Tony and James Shilling(2002).
The Post Foreclosure Performance of Commercial
Mortgages. Presented at University of Southern
California Lusk Seminar, March 29, 2002.
5
HISTORY

• Taurus has purchased in excess of USD
  250,000,000 in defaulted loans
• Results IRRgt40 (for investors, after
  fees/participations)

6
ORLANDO RESEARCH PARK

• Borrower (public/private partnership)
  defaults on improvement bond
• Barnett Bank forecloses
• Barnett acquired by Nations Bank (now
  Bank of America)
• 1.07 /sf improved land 6.25 /sf value of
  land today
• Exit land sales/BTS/Spec IRRgt30

7
777 MAIN STREET, DALLAS, TX

• 1,000,000 sf office tower 50 vacant
• Savings and loan crisis
• JV with Richard Rainwater
• Purchased at 10 CAP / 80USD/sf (no
  downside)
• Exit Crescent REIT IRRgt100

8
OMNIBUS PORTFOLIO

• 17 commercial buildingsover 4,000,000 sf
• 6000 apartments largest bankruptcy in
  Massachusetts
• Syndicate of banks
• Complex negotiations
• Exit Wholesale / Retail IRRgt60

9
PARLEX A MEXICAN STAND-OFF

• Sale leaseback under distressed conditions
• Bankruptcy imminent
• Liquidity exhausted no secondary equity

• Taurus buys real estate,subject to
• a 15-year lease,
• equity infusion in company,
• new bank support for company. 

• New bank group stepped in subject to
• real estate deal
• new Private Investment in Public Equity (PIPE
  was conditioned upon real estate deal and new
  bank commitment)

10
PARLEX EXIT

• Old bank paid off at discount.
• New bank secure based on PIPE and warrants
• Real Estate Sale provides additional liquidity
• RESULT
• Stock price soars 50 in 12 months.
• PIPE sold
• New bank cashed in warrants
• Entity sold to strong Hong Kong Company 

TAURUS sells improved credit For 50 return in
18 months