Distressed commercial real estate is being reclaimed by lenders at a rapid pace, but relatively few assets are being marketed and re-sold.[IMAGE]
According to the research firm ""Real Capital Analytics"":http://www.rcanalytics.com, lenders acquired some $10 billion of commercial property during the first five months of this year Ã¢â‚¬" via foreclosure or negotiated settlement. But they disposed of just $2.6 billion of commercial REO during the same period.
The company's analysts estimate that commercial REO inventory resulting from this cycle now exceeds $28 billion, all of which will have to be sold in the future, but the timing of disposition, Real Capital says, is uncertain.
Real Capital said in its report, ""There is a large amount of capital that is eager to acquire these assets from the lenders, at appropriately discounted prices, but lenders do[COLUMN_BREAK]
not have pressure to sell their REO immediately, and most are content to wait for conditions to improve further before selling.""
As a result, private investors and opportunistic funds have not been able to deploy much capital and have actually seen their portfolio holdings decrease this year, the company notes.
Real Capital says, though, that some of the decrease has been compulsory. The company reports that nearly half of the assets sold by equity funds so far in 2010 and about a quarter of the dispositions by the private sector were either transfers back to the lender or lender-forced sales to third parties.
The property portfolios of lenders, on the other hand, have increased far more than any of the traditional investor groups.
Real Capital says the data ""underscores that although lenders have been a relatively minor factor as sellers, the inventory of REO is growing quite large and going forward this will be a sector to watch closely.""
While a good number of equity funds are seeing problems with their earlier investments and losing assets to foreclosure, Real Capital says a new vintage of equity funds have raised significant capital for opportunistic acquisitions. But one of the uncertainties in the market is how patient that capital will be if distressed opportunities remain scarce, the company says.