Warnings Raised in Anticipation of Distressed Debt Sell-Off

Billions have been raised in anticipation of the day when investment banks finally decide to write-off the non-performing assets and paper currently residing on their balance sheets, putting them on the market at a deeply discounted price. Right now, it is widely assumed this will begin happening in Q4 of this year. But given the rocky events of the past year, some fund watchers, developers and investors can’t help but wonder whether the remaining part of the year will unfold as the industry expects it will.

Investment banks could well continue to resist selling assets at deep enough discounts — certainly they haven’t in any numbers thus far. Investors, for their part, may decide the market has bottomed out before it actually does — and pay too much for assets that have more risk attached to them than first realized.

That latter scenario is David Schechtman’s biggest concern right now. A broker with Eastern Consolidated, he tells GlobeSt.com that it is a question he constantly gets as he shows product in the New York area. “I can tell you people’s number one fear is that value still has much further to slide.”