The total value of distressed commercial real estate reached $114.2 billion in August, according to the latest issue of the quarterly Distressed Commercial Real Estate Journal. The journal is published by the Distressed Asset Recovery Team--a consultancy formed earlier this year by Beers and Cutler, Delta Associates, Fore Consulting, and BlackwellAdvisors--and uses data provided by several firms including Real Capital Analytics.
These latest figures represent an increase of 17%, or $16.8 billion since June, DART notes. The good news, however, is that the figures also establish that the pace of assets going into distress is slowing. How much that represents a genuine recovery is unclear as much of the slowdown is due to lenders bending over backwards to keep the properties under borrowers’ control, Greg Leisch, principal with Delta Associates, tells GlobeSt.com. If nothing else, though, the numbers are another data point to be added to the growing reports that suggest a recovery is on the horizon.
The picture the report paints, of course, is hardly pretty: retail properties continue to be the largest asset class under distress at $32.7 billion this month, compared to $29.7 billion in June. Indeed, in general every product type recorded an increase with hotel properties increasing the most, by 65%, to $18 billion. Single-family and condo loans account for most of the delinquency problems with construction loans, according to Foresight Analytics, which also contributes data to the report. Now, though, declining fundamentals and liquidity issues are pushing delinquencies up for other property types as well. Indeed, the delinquency rate has risen sharply in the past six quarters, from 7.2% in Q1 2008 to 17.1% in Q2 2009.
At $10 billion, Manhattan has the highest volume of distressed assets, followed by South Florida at close to $6.5 billion. The metro area experiencing the least distress is Baltimore.
Posted by:Richard Trautmann