The Myth of The Great Flood

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.