Distressed Commercial RE, Is It a Safe Bet?

It's safe for distressed commercial real estate investors "to go in the water" again, according to a top analyst that covers the market for Ernst & Young. "Yes, enjoy the swim," said Mark Grinis, a partner in the real estate distressed services group at E&Y. But he also cautioned that buyers need to have a reasonable outlook about their returns. Speaking at a National Mortgage News conference on "Buying and Selling Distressed Mortgage Portfolios," he gave this sobering assessment: "You will need to earn your returns." Buyers of distressed assets, he said, need to come up with a strategy that dovetails with where the distressed assets actually are. For example, notice of defaults on land loans peaked last year. Another asset class where NODs have peaked is in hotels. Grinis said those are areas where buyers will be seeing plenty of action. Everyone expected to see a flood of distressed assets on the market, he said. But each lender is making an individual decision on when to sell and take a hit, he said, adding that there is "no rush for the exits," which has helped to keep prices up.