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Slow Change in Deal Environment September 14, 2010

Posted by Sean Tufts in Articles, Blogs, Research/Data.
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Roughly half of the offers that we’ve written for clients this year were for “distressed” or “note sale” purchases.  As it turns out, most of those have been a significant waste of time as lenders continue sit on REO deals, extend debt, and generally refuse to acknowledge the reality of the market.  It is too bad frankly because our clients have had “turn around” solutions for some of those assets that today continue to struggle.  Asset and property managers have taken over numerous shopping centers in the Puget Sound and are now running them as receivers or on behalf of the lender as an REO property.  It has proved to be a successful venture for those managers but it is also keeping a much-needed value reset from occurring. One of the nation’s largest managers was interviewed by Retail Traffic saying just that,

Today, it’s the lenders that are taking it over and the lenders are just trying to bring the property to a point in time when they can sell it. They are not going to spend a lot of money on it. The properties in the last two recessions seemed to turn over quicker. In our analysis, it was within a 24-month to a 30-month period…We are in a 30-month period right now, and a lot of these properties are just [not being sold] and the lenders are not spending the money on them. They are maintaining the status quo rather then improving the centers.”

That attitude, combined with dozens of other factors, is contributing to the lack of real “deals” surfacing in the market.  The same has been true on the debt side.  Fortunately we are beginning to see some relief as banks reposition themselves.  Until non-performing debt sales start to gain serious momentum, lenders will be handcuffed to provide much needed new loans into the marketplace.  We look forward to moving beyond the current environment and this article gives us a glimmer of hope!

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