American Banker, an on and off-line trade magazine for the banking industry ran an article today reporting much of the same thing that I have been saying here on this blog That Sinking Feeling: CRE Flood Set to Start in ’10. Banks will face significant problems with commercial real estate starting in 2010. This is the beginning of what many believe will be the best buying opportunity in decades. Many of the professionals I work with who service lender’s real estate problems have been echoing this same thing for the last 2 years – now the time has come. It isn’t going to be brief either, this window is likely to be open through 2014.
“For a lot of community and regional banks that have a concentration in real estate, it’s gotta be problem No. 1,”
Mathew Anderson, Foresight Analytics
When commercial real estate distress comes up, for the most part, people in the industry are talking about institutional level investments, CMBS deals and the like, but there are huge opportunities in whole loans written and held by community and regional lenders. With each passing quarter the non-performing loan and commercial REO balances are rising along with the number of banks struggling with them. Many banks haven’t had a commercial real estate problem in years, and all this comes together to spell big opportunity for investors, brokers, consultants etc., armed with the right information.
Distressed Commercial Real Estate Statistics
At the close of the last quarter 4,518 banks reported non-performing commercial real estate loans. Meanwhile 3,126 banks reported commercial REO. With nearly $40Billion in troubled CRE loans there’s a mere $5.8Billion in commercial REO (REO is “Real Estate Owned” which comes from the line item on a call report “Other Real Estate Owned” or “property acquired through foreclosure”). These problems are accelerating not waning. The graph above shows how distressed commercial balances have more than doubled over the last four quarters.
The time has never been better to get positioned to take advantage of the coming avalanche of opportunity. In future posts, through the beginning of 2010 I will write about how to identify opportunities with community and regional banks.