BT : Distressed property to be sold

Business Times - 17 Jun 2010

Distressed property to be sold

Lenders loosening hold on these assets; multi-family property in demand

(NEW YORK) Financial institutions that have lent money to property investors are starting to loosen their hold on these properties, potentially putting more property into play, property insiders said this week.

Multi-family property is an area where this is happening, with relatively strong demand and banks more willing to move properties off their books, one top executive said at the Reuters Global Real Estate and Infrastructure Summit in New York.

'They seem like they're much more aggressive now. They're starting to really take things into hand, calling up and saying, 'What's the real number? How can we get this sold?' They want to step in. They want to get it done,' said Pam Liebman, chief executive of the Corcoran Group.

Many commercial property players have said that billions of dollars are waiting to be invested in distressed property.

However, little desirable property is on the market because banks are concerned about the strength of their balance sheets and are unwilling to write down property values, they noted.

Richard LeFrak, chief executive of the LeFrak Organization, a commercial property developer, said that overall, banks are still largely sitting on the assets when they can. 'They're waiting for their capital to get more robust before they have to write these things down. And if you could pay any kind of interest, they can play with you,' Mr LeFrak said.

This could happen, for instance, with European financial institutions invested in syndicated loans to largely failed condominium developments, he said.

'I think that some of the European banks are under a little more pressure now to raise cash, and that they may be forcing things where they are participating in some loans,' Mr LeFrak said.

Banks have not moved more quickly because they are still under water on some assets, these specialists said. 'I think they are culling through the inventory just like anybody else would and saying, 'If I wait with this one, I will do better',' Mr LeFrak said.

Among areas where banks have been willing to move in quickly to sell are hotel properties, where the taint of foreclosure can hurt business and eat into values quickly, according to Evercore Partners senior managing director Martin Cicco. 'There is a negative perception so they tend to move more quickly on that type of asset,' Mr Cicco said, noting that a hotel is an ongoing business rather than just a property\. \-- Reuters

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Mr LeFrak: 'They're waiting for their capital to get more robust before they have to write these things down.'