Would-be buyers of distressed office properties can see the troubled buildings just waiting to be marketed. They can see them on the balance sheets of banks and in the reports of rising defaults on CMBS loans. They can see them in the form of deals like the $31-million sale last year of an Orange County, CA asset called 3 MacArthur that sold for $83 million only two years before, and in the sale this year of another Orange County property, Griffin Towers, that went for $90 million compared with the $200 million that refinanced it two years ago.

Those opportunities are just the kind of bargains that investors expected to see when the capital markets crashed and it became evident that scores if not hundreds of office buildings across the country would be in distress. Yet such deals have proven to be the exception rather than the rule, according to Kevin Shannon, a vice chairman with CB Richard Ellis in Los Angeles and a broker on both the 3 MacArthur and Griffin Towers sales.

"The volume of distressed office sales has been disappointing." Shannon says. He explains that although the Griffin Towers sale is the largest office deal to close thus far this year in Orange County (a couple of larger deals are pending), distressed sales have not played the big role that was almost universally expected. "Most of the sales over $25 million that have occurred this year have not involved distressed sellers." In fact, Shannon continues, throughout the West Coast, most of the office building sales this year represent "normal selling by institutional and private sellers." The relatively few distress sales are exceptions, he says, and a number of those have to do with the effort by MPG Office Trust, formerly Maguire Partners, to get out from under the huge debt that it took on when it acquired its Orange County office properties at the top of the market.