Would-be buyers of distressed office properties can see thetroubled buildings just waiting to be marketed. They can see themon the balance sheets of banks and in the reports of risingdefaults on CMBS loans. They can see them in the form of deals likethe $31-million sale last year of an Orange County, CA asset called3 MacArthur that sold for $83 million only two years before, and inthe sale this year of another Orange County property, GriffinTowers, that went for $90 million compared with the $200 millionthat refinanced it two years ago.

Those opportunities are just the kind of bargains that investorsexpected to see when the capital markets crashed and it becameevident that scores if not hundreds of office buildings across thecountry would be in distress. Yet such deals have proven to be theexception rather than the rule, according to Kevin Shannon, a vicechairman with CB Richard Ellis in Los Angeles and a broker on boththe 3 MacArthur and Griffin Towers sales.

"The volume of distressed office sales has been disappointing."Shannon says. He explains that although the Griffin Towers sale isthe largest office deal to close thus far this year in OrangeCounty (a couple of larger deals are pending), distressed saleshave not played the big role that was almost universally expected."Most of the sales over $25 million that have occurred this yearhave not involved distressed sellers." In fact, Shannon continues,throughout the West Coast, most of the office building sales thisyear represent "normal selling by institutional and privatesellers." The relatively few distress sales are exceptions, hesays, and a number of those have to do with the effort by MPGOffice Trust, formerly Maguire Partners, to get out from under thehuge debt that it took on when it acquired its Orange County officeproperties at the top of the market.