Projects in difficult economic times - making carefully considered choices and minimizing losses

A project comes to a standstill: The building site falls silent, no tenants can be found, or a partner bails out. Scenarios like this are repeated over and over in the real estate business - even more frequently in difficult economic times. Often it is not the property that is the cause, but the fact that one of the investors gets into financial difficulties. The demand for neutral observers with local expertise who can get involved in such cases to help minimize risk is particularly great on the international market. The most important aspects are trustful cooperation, the consultants' international expertise, and a fast response. In most cases analysis of the project shows that it is more economical to bring the project back to life than to abandon it.   

Whether the first signs are untenanted properties or a planning or construction halt - when the writing is on the wall the pressure is high and fast action is required. Mastering this situation requires competent teams on the part both of the partner and consultant. Because in such situations it is particularly important that the financing banks act professionally and after careful consideration.

Pressure to act: From technical analysis to the decision
At this point, Drees & Sommer - as a partner with sound knowledge of both the local and international markets - is in a good position to find effective solutions. With the aim of minimizing losses, the consultants first carry out a technical analysis of the project for the client. This involves examining key factors such as project structure, costs, quality of existing buildings, contracts and schedules with regard to the fulfillment of existing lease contracts. This service is particularly helpful for financing institutions - and there is demand for German consulting companies with experience and local market knowledge who can take the special conditions of the local market into account. As a consultant, Drees & Sommer is normally part of an expert team examining aspects including market assessment and legal analysis, and undertaking negotiations with partners. The result of these studies forms the basis for the decision: Proceed or abandon. "This approach allows existing problems to be detected very professionally. Solutions can be found that play an important role not only in developing alternative courses of action but also the entire decision process. Ideally, this process increases our range of options and reduces risk," says Jürgen Schroeder, Member of the Management Board of Aareal Estate AG, whose portfolio includes "Distressed Foreign Assets". 

A new start - more economical than abandonment
Experience shows that losses are minimized when projects are brought back to life: A new start is often more economical than abandoning the project or selling the property.

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