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Life Preservers Buoy Distressed Assets

NEW YORK CITY-Panelists in sessions on investment opportunities and refinancing said obstacles to distressed deal flow need to be resolved.

By Paul Bubny | Updated on October 29, 2009

NEW YORK CITY-A host of factors have mitigated against distressed assets from coming to market, locally or nationally, in the volume most had anticipated, panelists said yesterday at the Eighth Annual RealShare New York. While greater deal flow will happen eventually, the roadblocks need to be addressed.

In the Investors Panel, subtitled “How to Embrace Distress and Find Opportunity,” panelists identified a series of “life preservers” that are keeping troubled properties from sinking as they normally would. They include changes in the mark-to-market and REMIC rules, the low spreads on 10-year Treasuries over LIBOR and banks’ tendency to “extend and pretend” rather than take writedowns.

Robert Knakal, chairman of Massey Knakal Realty Services, also pointed to the inaction of special servicers, who by and large are swamped and often ill-prepared for the mortgage situations they now face. In the “Refinancing When the Mortgage Comes Due” panel, Jonathan Hornik observed, “Special servicers are almost incapacitated, at this point, as to when they can cut a deal.”

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