If you're looking for distress in the Northeast, you'd beadvised to think class B properties and suburban markets. That'sone of the observations of Dennis Walsh, a Boston-based seniordirector at Tremont Realty Capital, when asked about where theopportunities lie in the region's inventory of distressed assets.And if you're planning to focus on a specific property sector, thegreatest sources of opportunities in the Northeast are in theoffice, retail and hospitality sectors, says Yitzie Sommer, aMarcus & Millichap vice president who points out that, "themarket for industrial and especially apartments has always been,and continues to be, very tight" in the region. Sommer also echoesWalsh's observation about suburban markets, saying "Suburban areasoutside of Boston and in Long Island have been the source of goodopportunities for investors."

Walsh explains that lenders and owners of top-tier properties incentral business districts simply aren't going to offer discounts,even if a property is under some distress, because the gatewaycities in the region "are such prime markets for so manyinvestors." Those in control of the top-quality properties, hepoints out, "assume that the asset will be worth something at somepoint, if not now," because places like Boston; New York City; andWashington, DC are so popular with investors both in the UnitedStates and abroad. "There is an expectation that properties willalways be worth something to someone in the gateway cities becausethey are not secondary or tertiary markets, and they are high onthe list for investors who take a longer-term view of things,"Walsh explains.

The inventory of distressed assets in the Northeast totals $26.2billion, according to the latest figures from New York City-basedReal Capital Analytics, which notes in its August report that thedistress picture in the Northeast and the rest of the US "hasfundamentally changed." Lenders now are more aggressively moving toliquidate or resolve troubled assets, RCA explains, and inflows ofnew distress have declined since the onset of the financial crisis,dropping to their lowest level--$12.7 billion in the latest quarterafter three straight quarters that topped $18 billion.

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