Investors who are interested in acquiring distressed properties are confident that there is an adequate supply of inventory available to choose from throughout the country, according to a survey by Information Management Network.
In the survey that featured real estate funds, plan sponsors, endowments, foundations, institutional investors and industry service providers, 98% of these individuals believe there is still a good supply of distressed real estate investment opportunities in many markets.
The majority of survey respondents, approximately 78%, feel that the real estate investment climate is improving. One factor that has had a major affect on the housing industry is obtaining financing for a property, but 70% of surveyors feel that financing has gotten easier.
However, out of the 98% who think now is still a good time to purchase distressed properties, only 42.9% said they would buy a note from a bank, foreclose on the mortgage and then take over the asset.
According to the IMN survey, nearly 57% think that returns will be strongest in secondary markets compared to Gateway cities.
Besides investing in the U.S. market, 23% of investors were most interested in buying assets in Brazil, followed by Canada at 18% and 8.3% for the United Kingdom, China and Australia.
One company that recently purchased a distressed asset for a significant return is Baceline Investments. The Denver-based private equity real estate investment company bought a foreclosed multi-tenant retail center in Sedona, Ariz. called Tequa Festival Marketplace for $4.1 million, which is approximately 20% of the property’s original loan of $20.3 million.
“Many in the industry thought that the commercial real estate downturn would cycle through by the end of 2009, but nearly three years later we are seeing that extraordinarily low purchase price deals still exist,” said David Puchi, principal of Baceline Investments.
“The general feeling is that big players in the commercial real estate market are chasing a limited number of investment properties on the coasts,” Puchi added. “With the majority of investment capital seeking property almost solely on the East and West coast, more and more they are finding a high barrier to entry because of the scarcity premium in those geographic markets.”
Baceline’s distressed property initiative is designed to acquire valuable commercial properties that have suffered from the credit crunch and financial market instability caused by the most recent recession.
Property types that the company acquires include retail, industrial, portfolios up to $100 million and single assets that range from $2 million to $30 million. The target markets Baceline focuses on purchasing properties include the Rocky Mountains, the Southwest and Midwest.
