Distressed Opportunities Down in the OC

NEWPORT BEACH, CA-“Across the board, rents and vacancies are better than they were in the fourth quarter, and Orange County, in particular, has seen good growth,” said keynote speaker Allen Greer, managing member of Greer Advisors LLC, during a recent Sperry Commercial quarterly broker exchange here at the Pacific Club. Panelists at the event, which was titled “Distressed/REO Commercial Real Estate Update 2013,” said that the county is performing better than anywhere else in the country, with “fewer distressed opportunities in the immediate area.”

Greer pointed out that California—Orange and Los Angeles counties, in particular—both plunged first and harder than other markets during the economic downturn, but are recovering at a faster and stronger pace due to increasing demand from money that was once sitting on the sidelines but is now chasing product. Additionally, publicly traded REITs, which Greer defined as “the best of the best,” are still very popular due to the market wanting to place money in higher-yielding investments other than safe T-bills. He said that REITs are performing at an “all-new high this month, at or better than we were in '05/'07.”

Also part of the program was a panel discussion amongst four industry insiders: Ray McLaine, president of the Commercial REO Brokers Association; Richard Yarbrough, president of CAL-TEX REO Brokerage; Eric Paulsen, president of the commercial division of Auction.com; and Erik Koentje, senior executive of CoStar Group. The panelists shared that the rate of distressed deals in the rest of the country outside of Orange County is approximately 12%, while Orange County is at 8%.

The panelists also agreed that this is the opportune market in which to buy, with banks now letting go of the non-performing notes that they had been holding onto for the past five years. Many brokers in attendance at the event admitted that they were presently in contact with a lot more people who are eager to buy commercial real estate now than from even just a year ago.

Panelists agreed that the market is finally back on the rise, at least in Southern California. Rand Sperry, CEO of Sperry Commercial, declared during the event that “now is a good time for brokers,” and Koentje added that today's real estate is “the perfect storm … with a lot of real estate in the wrong hands … and a lot of dollars trading hands. Money is cheap and prices are low.”

As GlobeSt.com reported earlier this month, some 70% of investors who responded to the latest non-performing loan survey issued by Ernst & Young expect the US market for non-performing loans to stay active for at least the next year. (Download the full report. )