New DebtX Study: Sealed Bids Maximize CRE Loan Sale Prices

Groundbreaking Research Finds Proceeds For Non-Performing CRE Loans Are 10% to 20% Higher with Sealed Bids Compared to English Forward Auctions

BOSTON--(BUSINESS WIRE)--DebtX, the largest marketplace for loans, today released new research definitively showing that sealed bids for non-performing Commercial Real Estate (CRE) loans consistently produce loan sale proceeds 10% to 20% higher than English forward auctions.

“DebtX’s research for the first time shows that sealed bids generate non-performing loan sale proceeds 10% to 20% higher than English forward auctions”

Based on an analysis of loan sales at DebtX’s marketplace since 2010, the study found that a sealed bid generates higher prices because the format leads to outlier offers more frequently. The often uncertain value of non-performing loans accounts for the wider dispersion of offers by bidders.

To download the study, visit https://www.debtx.com/Contact/WhitePaper.asp.

“DebtX’s research for the first time shows that sealed bids generate non-performing loan sale proceeds 10% to 20% higher than English forward auctions,” said DebtX CEO Kingsley Greenland. “If price maximization is the goal, institutions should stop using an English forward auction for non-performing CRE loan sales. A sealed bid format consistently delivers higher proceeds and is a better option for every institution selling a non-performing CRE loan.”

DebtX found that English forward auctions don’t maximize loan sale proceeds due to a variety of factors, including shill bids, insider bidding and the assessment of a 5% sales fee to successful bidders in an English forward auction.

The study also noted that loan sale proceeds for English forward auctions can exceed the results of sealed bids, but only when a bidding war occurs. The research showed, however, that bidding wars for non-performing CRE loans are atypical and are difficult to predict in advance.

For more information about the study or DebtX’s loan sale advisory services, call 617.531.3400.

About DebtX

DebtX operates the world’s most liquid marketplace for loans. Through its loan sale advisory, valuation and analytics services, DebtX maximizes loan sale proceeds for financial institutions and government agencies. For syndication, agency, and loan sale professionals, DebtX provides a suite of web-based deal management solutions. DebtX is based in Boston, with offices across the U.S. and Europe. Call +1.617.531.3400 or visit www.debtx.com. Follow DebtX on Facebook, Twitter and LinkedIn.