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Paul Denholm

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Distressed Sales of Property Assets - How to Convert Illiquid Assets into Liquid Assets?

Property is traditionally a notoriously illiquid asset.

• In the current environment of insolvencies and distressed sales, property assets are being offered for sale without any warranties and at the price of expensive and time consuming due diligence, all of this in the face of rapidly changing market and lender volatility.
• First Title has developed a solution, which is a flexible proposition that can be tailored to assist Administrators in exercising their responsibilities.
• Our solution is in the form of an insurance policy containing a package of legal indemnities. This enables the disposal of Property assets by means of an accelerated, sample based due diligence, without the time and cost associated with traditional due diligence. This allows the transaction to be completed within the shortest possible time span, before it can be overtaken by rapidly changing market conditions.
• Our legal indemnities address shortcoming inherent to distressed sales by providing title warranties, which guarantee the title to the asset and provide coverage against a range of matters associated with legal ownership of the asset.

How has First Title's solution been applied by to insolvencies?

• Our legal indemnities were used to facilitate the recent high-profile purchase of Dawnay Day's UK portfolio of 221 commercial assets.
• By offering First Title's policy as part of the overall proposition, the Receivers made the sale of the property portfolio more attractive to the purchaser who did not have to 'take a view' on any known or unknown issues associated with the title and legal ownership of the assets.
• This made the assets more saleable and attractive for a purchaser and significantly increased the speed of the legal elements of the transaction.
• The Receiver had the added benefit of being able to include the cost of First Title's policy in its recovery costs. Not only is this the first time that such a policy has been used as an allowable expense, but it is also the first time that an insurance policy had been used in this manner for insolvency.