CHICAGO-Momentum is a new word, one not used in the past seven-to-eight quarters, when discussing distressed real estate in the United States. However, locally-based Navigant Capital Advisors in a third quarter report says that values have increased for all asset classes, including distressed properties.

According to Navigant, resolution activity during the third quarter averaged $2.6 billion each month, more than double the level of restructuring activity. Momentum signals showed through each month. In September alone, for example, the volume of distressed loans being restructured and resolved, about $4 billion, almost fully offset about $4.3 billion of new additions to distress.

Darin Buchalter, managing director and head of real estate practice for the company, tells GlobeSt.com that this is the first point of equilibrium since the recession began. “This is important because our other observations, and geographic data, is also starting to show signs of life,” he says. “We are just now starting to talk about recovery, when we can get momentum, including for assets and the capital markets.”

He said that he agrees with other experts who predict we are on a slow, slow road to recovery, with challenges that still exist in secondary markets. Also, instead of large bulks of distress, there are more properties and loans being worked out by asset-specific plans. “We’re seeing more successful restructurings, not just extensions or loan modifications, with more new money being a participant.

Buchalter says that with respect to bulk loan sales being different than in the RTC days, that there hasn’t been a right or wrong way to facilitate moving through this last period. “I think good business judgment is being exercised in all distress, with the facts of each so unique. It’s important not to generalize this recovery.”

He says the CMBS market is still an issue. The delinquent unpaid balance for CMBS grew only moderately during September, when the balance increased to $62.2 billion, representing over 8% of the outstanding balance of CMBS loans. “The level of overhang of maturities occurring in the CMBS markets is very high,” Buchalter says.

Instant Insights /

Distress Volume Hits Equilibrium

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