* AlixPartners clients “begging” for good real estate buys
* Healthy banks starting to lend for property purchases
* Snapback in commercial real estate could begin late 2010
* Chinese, German investors interested
(Adds comments from Federal Reserve Chairman Ben Bernanke on commercial real estate troubles)
By Chelsea Emery
NEW YORK, Feb 24 (Reuters) - Calls are pouring in to the office of AlixPartner’s new specialist in distressed real estate from investors pleading for leads on possible real estate purchases.
The interest belies worries about more collapses in the sector, said Dennis Yeskey, who heads the North American commercial real estate group for AlixPartners, a corporate restructuring adviser. “I’ve never seen so much equity ready to pounce on real estate,” said Yeskey, in an interview. “Some of our clients are begging us to find good products. I have that conversation, three, four, five times a day.”
In a study on the outlook for commercial real estate to be released at a later date, Yeskey writes that a “snapback” in commercial real estate deals could begin in late 2010.
His experience is echoed by a December DebtWire survey that showed almost 50 percent of the hedge funds and other distressed debt investors queried said that real estate offered the greatest opportunity this year.
Until recently, distressed investors held back because many troubled properties were in a so-called amend-and-pretend holding pattern, in which financial institutions refrained from foreclosing on properties because they did not want the write-offs to appear on their books.
But that is changing. Bank profits have improved, meaning they will be more willing to foreclose and sell those assets to investors, even at a loss. Also, healthy banks are returning to lending, as well as new mezzanine investors and specialty finance companies, Yeskey said in the report.
Regardless of some recent optimism about the U.S. economy, Federal Reserve Chairman Ben Bernanke said on Wednesday that commercial real estate “remains probably the biggest credit issue that we still have.”
Bernanke, addressing the House Financial Services Committee, also said “there are a lot of troubled commercial real estate properties and they are causing a lot of problems for banks, particularly small- to medium-sized banks and we’re watching them very carefully.”
Foreign investors, particularly the Chinese and Germans, and some sovereign wealth funds are lining up to jump into U.S. properties, said Yeskey.
Opportunities for investors and lenders will be better this year than even in the early 1990s, when the U.S. economy was struggling through a recession and a savings-and-loan crisis that stemmed from a real-estate bubble. That means investors need to get their financing lined up immediately.
“You will see more transactions later this year, at slightly higher prices than people expect,” Yeskey said. Buyers will pay between 10 percent and 20 percent more than in 2009, he said.
But because banks and other lenders will be more conservative than in recent years, investors need to prepare thoroughly, including identifying friendly banks and having a team of operations and management specialists ready to jump.
“We think this is a pretty good business opportunity,” said Yeskey. “We have a lot of clients lining up.”
(Reporting by Chelsea Emery; Editing by Richard Chang)
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