Connecting with Capital: Realities and Opportunities
By Julie M. Mcintosh, CRE
Although the economy is showing signs of new life, the reality is that commercial real estate continues to operate in a very challenging environment. The vast majority of current commercial transactions are distressed debt assets, with banks and the FDIC selling both portfolios and individual loans.While everyone is being cautious when it comes to usual financing, there are some opportunities being directly created by the built-up inventory of distressed assets.
Large investors interested in commercial properties are attracted to bundled distressed assets, potentially creating opportunities for commercial brokers. Much of the debt inventory is being purchased by investment companies that specialize in or are currently focused on distressed real estate management and workouts. Once these investors have acquired portfolio assets, they need help in managing the problem properties to maximize value and positioning and selling the property.
With the increase in bank profitability and viability over the past year, banks are better positioned to divest of problem loans and foreclosed commercial properties. Often the most efficient and effective solution is selling a portfolio to an investor who then works toward the best resolution for each individual asset over time. The bank is left with new capital to invest in productive, performing loans. As the investors buy non performing loan and REO portfolios, they will look to reassess and sell, and commercial brokers can be important to their success – a silver lining of sorts for qualified REALTORS®.
Valuing distressed property is problematic when so many of the available assets are distressed. The large investment management companies need local commercial brokers and agents to help them realistically value available property being offered in debt portfolios during the bid process. Local market knowledge can be a huge advantage because trustworthy market data is essential, especially if the investor is from outside the market area.
A good source of information about who is buying these portfolios is the FDIC website itself. Under Asset Sales, there is a complete list of names and addresses of all the purchasers of loans and real estate from the early 1990’s to the present. REALTORS® who can provide accurate, timely information and advice on the market activities in their area are valuable resources that investors will remember and rely on for transaction support.
Julie M. McIntosh, CRE, is senior vice president at Rialto Capital Advisors, Atlanta, GA. She specializes in investment management and workout of distressed debt portfolios and has been a member of The Counselors of Real Estate® since 1999.