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Vultures must wait for the feast
In May the Wall Street Journal reported that a slew of private-equity funds have allowed investors to exit their funding commitments because of a dearth of available properties. That's because lenders and banks are holding on to distressed properties, partly encouraged by federal guidelines issued last year that give banks more leeway to modify loans to avoid bigger losses. They are avoiding selling troubled assets, hoping to earn their way out of trouble.
Retail property, particularly hard-hit by shrinking rents and rising vacancy rates, is headed for an even greater tumble when those mortgages come due for rollover. Looking back at the wave of refinancing in 2005 and 2006, the bulk of those loans are scheduled for roll over in 2010-2012. However, with shrinking income has come shrinking value, and very few retail properties are still worth what they are mortgaged for. When investors are not able to roll over these loans, there will come a most unwelcome day of reckoning, for both the lenders and the investors. Properties already in receivership and scheduled for auction are frequently withdrawn when they fail to get even a glimmer of investor interest, or at least not at prices the lender is prepared to face up to.
With approximately $700 billion worth of loans coming due on these distressed properties over the next four years, investors will soon find plenty of opportunity to be...opportunistic.
As one group of investors struggle to hold on to their assets, another stands on the sidelines, eager for the feast to begin.
By: Janet Choynowski, Publisher
( 3 Votes )
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