EXTRAORDINARY DEAL FLOW
As a result of the great recession of 2007-2010, an historic amount of product directly in Directed Capital’s operational niche currently exists in the marketplace. Directed Capital, which currently screens more than $5 billion of inventory for potential bidding every quarter, expects even greater amounts of inventory to enter the market during the next four to six years.
During the past 15 years, Directed Capital has developed strong relationships and a nationwide pipeline of product that increases the opportunity of success. The firm has bid on assets from more than 150 different banks, brokers and other sellers that continue to provide deep sourcing capabilities for Directed Capital.
Directed Capital has historically purchased notes at an average discount of 18% of the outstanding loan balances. The current market enables the firm to win secondary note sales with the same risk characteristics at even greater discounts of up to 30%. Larger discounts potentially provide the firm with opportunities to realize strong returns for its investors. The firm expects these market dynamics to remain in place during the next four to six years.
Directed Capital has a deep understanding of the market and has learned through experience and market intelligence how to accurately determine the price that should be paid to win product. The firm’s management team strives to eliminate as many unknowns as possible during the due-diligence process to help ensure the firm offers competitive prices. Directed Capital underwrites conservatively, bidding on transactions that the firm expects to produce unlevered yields of between 12% and 16% during a 36 to 48 month horizon. The firm then manages the assets with the goal of increasing these expectations.