Monday, June 13, 2011

Distressed Real Estate Opportunities Increasing

As we round the 3th quarter 0f 2011, we are seeing that lenders are increasingly willing to sell notes/assets to clear up their books.  With the real estate recovery under way, more sideline capital are chasing the few opportunities on the market and The increased demand is prompting distressed debt owners to place more of their inventory on the market.
LNR and CIII are selling a tremendous amount of product through a large auction now and the FDIC has another $700 million portfolio to be sold in the 3rd quarter 2011.
We believe we are at the tipping point towards a more normalized market where new originations will commence in early in 2012 reflecting normal CMBS output and lending patterns similar to 2005 and 2006.
Though 2012 will see more distressed debt opportunities we see an overall slow down as the economy and its recovery finally impacts real estate positively.
Last month I interviewed Sam Zell where he stated that inventory (supply) would be waning since little new real estate product has been constructed in the last four-and-half years in either multifamily or office development.  Sam noted that demand is still weak but the sheer lack of new inventory will increase the value of existing real estate as certain properties become more obsolete and placed out of service.  Eventually demand will return, which will  push values back up.