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E&Y: 'One-Off Deals' Dominate Distress

NEW YORK CITY-Once distress begins flooding in, the market could quickly grow competitive, Ernst & Young says in a new study.

By Paul Bubny | Updated on July 31, 2009

NEW YORK CITY-While waiting for the pool of distressed assets to deepen, most buyers have just dipped their toes in the water in “one-off deals,” says Ernst & Young in a study released this week. “We haven’t seen many portfolio transactions so far,” Chris Seyfarth, the study’s author, tells GlobeSt.com. “Given the size and the magnitude of the problem with banks, I think the expectation is that at some point we’ll start seeing sizable portfolio transactions.”

The study found that 53% of respondents to an E&Y survey have purchased distressed or nonperforming loans in the last 18 months. However, 45% of those who have not yet pulled the trigger believe it’s too early in the game to even attempt to purchase nonperforming loans at the moment.

One reason is the slow rate at which distressed assets are coming onto the market. Distressed situations are “piling up faster than they’re being resolved,” says Seyfarth, E&Y’s San Francisco-based national director of nonperforming loans. He adds, “The broad view is that commercial real estate assets are getting worse, not better, and that’s going to impact financial institutions. The issue is that the price expectations are different between the two players, and in some cases significantly different.”

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