Before launching his session "Asset Management" at the third annual RealShare Distressed Assets on Oct. 5, Andy Sundgaard commented on his morning. "It's been a tough year," said NorthMarq's senior vice president of business development. "As I was coming up on the escalator this morning, on my way to the conference, I floated over to the coatings and paint conference." The idea, he added jokingly, was to throw in the towel on real estate, and focus on paints and coatings instead.
Though Sundgaard's remarks were made in jest, much of the conference (produced by ALM's Real Estate Media Group, which publishes Real Estate Forum and GlobeSt.com), supported similar sentiments. The consistent message delivered to the 300-plus attendees at the conference, held at the Gaylord Texan Hotel & Convention Center in Grapevine, TX: Things are tough, they aren't likely to improve any time soon and there is still a great deal of stress-and distress-in the system.
Keynote speaker Christopher Seyfarth, transaction advisory services partner with Ernst & Young, got the ball rolling by pointing out that, despite record profits announced by banks, there is still a great deal of distress on the books. That distress, he noted, is sitting primarily with the regional and community banks. Later on, Foresite Realty Partners LLC's president and CEO Donald Shapiro echoed Seyfarth's comments in the "Who's Buying, Who's Selling and Where Are the Deals?" session, noting: "We have more desert to cross and a long way to go. Deals need to be worked out."
Another common topic was CMBS-almost every panel touched on it, and almost every panel had the same thing to say; namely, there are millions of dollars of CMBS loans set to mature in the next handful of years, and no one's certain what will happen when that occurs. Grubb & Ellis Co.'s Scot Farber wondered where the money was going to come from to take care of the maturing loans. "Banks aren't lending on distressed stuff," he remarked during the "Property Sector in Focus" panel. "We're stuck on the capital issue. Lenders aren't lending and CMBS won't be able to clear the distressed assets."
At this point, however, some servicers aren't interested in taking on the CMBS assets. "We like for the borrowers to adapt strategies to preserve and protect the asset," commented C. Meade Hubby, vice president of special servicing, KeyBank Real Estate Capital. Along those lines, a couple of the panels acknowledged that there is more sophistication connected to the consequences of foreclosure, and servicers, or anyone else, aren't going to enter into that step lightly these days.
There were, however, a handful of bright spots throughout the day. Luncheon speaker Alan Pontius, senior vice president and managing director with Marcus & Millichap Real Estate Investment Services, pointed out that workouts are starting to outpace newly distressed assets, while real estate, as an investment, is becoming more popular.
And Seyfarth added his own bit of optimism, noting that the number of problem banks is declining. Furthermore, the horror stories of the boatload of maturing debt drowning the economy haven't come true . . . yet. "It's not clear where we're going," Seyfarth commented. "We're a good deal closer to those dire predictions than we were before."
Along those lines, the conference did offer plenty of advice to attendees. Robert Kline, principal and CEO of R.W. Kline Cos., suggested that investors seek out the hot spots and opportunities that are likely to occur in the future, rather than what's hot today. Bliss Morris, founder and CEO of First Financial Network, pointed out that networking and strategic partnerships are the way to take advantage of investments. Meanwhile, Pat Jackson, CEO of Sabal Financial Group LP, suggested that lenders holding onto distressed assets and investors come closer together in terms of expectations of sales price. The panel session entitled "Loan Sales" cautioned RealShare attendees that note sales and real estate sales were two different things, and shouldn't be treated the same way. The "Special Servicers Power Panel" also shed some insight on what distressed assets were hot (such as multifamily) and what were middling (office, mostly). However, given that some of the problems can be laid at the feet of the ever-floundering US economy, Real Estate Roundtable's senior vice president, Chip Rodgers, had the best, if somewhat whimsical, advice. "We need to kick the economy in the rear and figure out how to get things moving," he said.
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