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In my June 19 analysis of the distribution of banks’ commercial real estate owned (REO), I described how a small subset of institutions accounted for a disproportionate share of all REO held in the nation’s banking system. Depending on one’s perspective, this is not entirely a bad thing. After all, it means that thousands of institutions have only very small REO pools to manage. The challenge of REO management is more compartmentalized and less pervasive than it is sometimes described when only average statistics are employed. On the other hand, the data also shows that investors seeking to acquire assets from banks will have to work very hard to uncover opportunities. The set of banks with large REO pools are generally well known to investors and policymakers. The latter does not necessarily see one-off dispositions as an efficient path to balance sheet health.

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