New Growth Advisors was recently appointed receiver in Clermont County Common Pleas Court of an operating self-storage facility in Milford, Ohio operating as Milford Fortress Storage after a large, national lender referral. NGA operated this medium sized self-storage operation, increased tenancy and monthly operating cash flow and sold the going-concern business operations and real estate in a single transaction in a competitive receiver’s auction sale.
The operation of this facility was complicated by the significant deferred maintenance that resulted in areas which could not be occupied or rented. With a need to increase tenancy NGA worked with on-site personnel to maximize the use of the space to increase cash flow and increase the value of the facility to a buyer. The deferred maintenance limited NGA’s ability to increase tenancy and maximize profit in advance of the expected sale of the business and real estate.
NGA worked closely with listing realtor to identify potential buyers, both from this industry and financial buyers, contact these prospective buyers and provide them overview material on the facility and its operations. NGA then helped the buyers understand the nature of a receiver’s sale and why it would be worthwhile and advantageous to be the “stalking horse” in an auction. NGA was able to identify a prospect willing to make an offer and saw benefit to be the “stalking horse” in the auction.
A “stalking horse” offer is put forward by a party interested in acquiring the assets at auction. This party, comes forward to make an offer prior to the actual auction and in exchange for the efforts, cost and risk this party, the stalking horse, is taking often gets bid protections and sometimes a break-up fee.
In this instance for stepping forward and making a pre-auction stalking horse offer this buyer requested bid protections. These bid protections included reimbursement of certain of its expenses of entering into the pre-auction contract including its costs of due diligence, legal representation and accounting assistance, to be paid from a winning bid that exceeded their lesser stalking horse offer. A further bid protection was a bidding increment that might discourage bids exceeding the stalking horse offer.