Stout was engaged to render a fairness opinion to the general partner of a real estate credit fund regarding a proposed transaction in which the fund would sell a portfolio of real estate-backed loans to a newly formed fund managed by the same manager.

Our analysis relied on due diligence of the underlying real estate backing each loan, including the timing and status of various construction and remodeling activities that were ongoing at certain properties. Certain loans also contained provisions that allowed for further draws over time, requiring us to incorporate the valuation impact of the unfunded portion of each relevant loan facility. We performed an analysis of the appropriate market credit spread to be applied for each loan and incorporated specific loan features (undrawn availability, prepayment features, etc.) to determine a value range for each loan and the loan portfolio.

We issued an opinion that the consideration being received by the fund was financially fair to the fund. This enabled the general partner to recommend the transaction to fund investors and the LPAC with confidence, and the fund subsequently executed the transaction.