The good news for vulture investors, which now prefer the euphemism "opportunity investors," is that the delinquency rate has been steadily rising. The year-end 2003 delinquency ratio was 0.35%. Three months earlier, it was 0.29% and at year-end 2002 it was 0.14%.
The CMBA survey of its members found that 99.65% of the California commercial real estate loans serviced by eighteen mortgage banking firms were either current or only one payment delinquent. That translates to 21 individual loans -- representing $212 million of $59.8 billion in loans and 0.21% of the nearly 10,000 loans included in the survey -- being more than two or more payments past due.
The three largest loans, representing 40% of the $212 million, were a $34.4 million loan on an office building, a $32.5 million loan on a hotel and a $17.5 million loan on a single purpose property, all of which are located in the San Francisco area, CMBA Commercial Consultant Peter Ulrich tells GlobeSt.com.
If job growth remains stagnant and rents stay depressed into 2005, as many expect, local experts predict it will push some commercial real estate owners into distressed sales. In a recent feature in GlobeSt.com sister publication, Real Estate Southern California, Tim Hennessey, managing director of Western states for Charlotte, NC-based Mountain Funding LLC, says there are a limited number of opportunistic investments in the NorCal market right now because there hasn't been a wholesale re-pricing of real estate assets in the region given the sour economy. As such, he says there is a limited supply of inventory trading hands, "although we expect deal volume to increase as some owners and operators begin to feel the pinch of capital providers to repay their investments or loans."
Other firms also expect "opportunistic" investments will soon be rising to the surface. In the same article, La Jolla, CA-based Equus Realty Advisors chief investment officer Jeff Schindler says the company views Northern California as a key acquisition territory in 2004, and Fred Wehba, president of Los Angeles-based Bentley Forbes, says rental prices are so depressed that he, too, expects to see more foreclosures, which should generate more investment activity. "There are situations where I can see some things not being all that rosy for existing owners," he says. "We have some real interest in properties there right now."
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