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ATLANTA-At a time when practically every commercial real estate firm is announcing the formation of teams handling distressed assets, Marcus & Millichap Real Estate Investment Services is already well ahead of the game. Its special assets services division, launched more than two years ago, is already looking to set a record for distressed property valuations this year and expects to top it in 2009.

The division has completed more than 1,000 valuations for a broad range of financial institutions, asset managers and large CRE owners thus far in 2008 and expects the number to exceed 1,500 by year end, the highest total since 1993, according to Bernard Haddigan, Marcus & Millichap’s managing director in Atlanta and national executive in charge of Special Assets Services. Marcus & Millichap has already sold more than 100 troubled assets nationwide this year, with more sales expected as lenders attempt to clear up balance sheets and private-equity funds work to free up capital.

“A lot of firms don’t get their hands into the dirt the way we do,” Haddigan tells GlobeSt.com. “None of these other firms have cultivated the relationships that we have, and we’ve been here all along. We have the technology and infrastructure to be able to share information quickly.”

Encino, CA-based Marcus & Millichap established its special assets services division in 2006 and expanded it earlier this year, linking eight regional directors throughout the US to oversee a team of experienced investment brokers at 75 offices across the country. Its agents maintain relationships with local and regional lenders and are often asked to assess problems with commercial portfolios, says John Leonard, the division’s eastern regional director in Atlanta.

Although commercial real estate fundamentals remained relatively healthy through the first half of 2008, the escalation of the global financial crisis in recent months has intensified job losses, which in turn have led to higher vacancies and added strain on financial institutions, observes Haddigan. That combination is elevating the number of assets that need to be sold, he says.

When it comes to dealing with distressed or lender-owned commercial properties, an immediate sale may not always be the chosen strategy, according to Haddigan. In many cases, lenders and government agencies that control commercial real estate will need property or asset management services.

“As part of our advisory capacity, we are ideally positioned to recommend a best-of-class third-party asset or property management firm through our affiliate relationships by market area,” Haddigan says. “This keeps us objective in helping the client select the best choice for that service and not have the perceived conflict of interest in prolonging the hold period. It also allows us to concentrate on what we do best and that is to analyze, value, position and sell properties into the marketplace efficiently.”

Marcus & Millichap’s strengths include working with the private-client market, which has ready access to capital for distressed assets but is not necessarily as well organized as institutional investors and REITs, which Haddigan notes are in a state of “paralysis” lately. Unlike many other CRE firms that offer multiple services, Marcus & Millichap sticks to investment sales and “our depth of relationships with private capital is second to none,” he says.

Haddigan notes that a lack of overbuilding is the biggest difference between the current down cycle and the early 1990s, yet the lack of debt availability in the marketplace makes this one worse. Most distressed assets currently involve busted multifamily or single-family residential deals, though the retail sector is likely to contribute even more after the holidays, he says.

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