Distressed Assets

JANUARY 2010

INVESTOR

An Interactive Digital Newsletter
Published by GlobeSt.com
& Real Estate Forum

Providing Field-Level Guidance on the Acquisition and Disposition of Distressed Assets

2010: Closer to

DECLINES IN VALUE BEGIN TO SLOW

Breaking Through

Commercial real estate observers say REITs, the FDIC,
special servicers and valuations will help to ease the logjam

For all the talk of distress in 2009, we
certainly didn’t see many deals transpire.
Yet there are high expectations that trades
will begin to ramp up and some of the
pent-up capital waiting to take advantage
of the distressed

University of Louisiana at Lafayette.

“That deposit insurance fund is close to zero,” he says. “The worst thing the FDIC could do is slow down the pace of bank closures because they’re low on funds and afraid of tapping their line of credit.” The agency has a $500-billion credit line with the US Treasury. It also accelerated assessments last year, having banks prepay them, to find another $40 million for its liquidity.

DEAL SPOTLIGHT

BY JILLIAN AMBROZ market will see some play. That

could lead to a better sense of valuations, though there is still speculation as to whether we’ve hit bottom.

One thing that is certain is the coming year will bring us one step closer to working through the glut of troubled assets. As for what factors will shape that resolution, many industry observers suggest investors pay close attention to the Federal Deposit Insurance Corp., special servicing, asset valuation, REITs and the government’s plethora of programs.

As for the institutions the FDIC seized last year, it has been slow to separate the assets from the banks. The agency has instead been executing loss-sharing agreements, guaranteeing 80% to 95% of the assets up to a certain point, Wilson says. “After the write-down, the FDIC is on the hook for that 80% to 95%,” he says. “That’s primarily how the troubled assets have been sold.”

DISTRESSED PROPERTY LISTINGS FROM RCA, TREPP

It’s an understatement to say the FDIC had a very active year in 2009. With an estimated 150 failed banks by press time, the agency has been seizing assets and moving them through auctions and other note sales. At the end of Q3 2009, the FDIC insured $5.3 trillion in bank deposits with an $8.2-billion deficit, says Linus Wilson, a finance professor at the

We should see the FDIC do quite a bit more selling in 2010, says Bliss Morris, president and CEO of First Financial Network, one of the firms tapped by the FDIC to auction distressed debt.