UNTIL U.S. BANKS are compelled to sell off distressed properties at significant losses, the retail property transactions market will remain in deadlock, executives said at the International Council of Shopping Centers’ (ICSC) New York National Conference recently. Plenty of money is sitting on the sidelines waiting to be used for the acquisition of properties, but no one wants to be the first to make a move without a benchmark for pricing, developers and financiers say.
Institutional owners don’t want to take the write-down. And the government, wary of being accused of funneling funds into the hands of private developers, is allowing banks to take a wait and see approach on the millions in distressed retail real estate loans on their balance sheets, says Rich Walter, president of retail investment advisory firm, Faris Lee Investments. “What the FDIC is basically saying is that if you think there’s ever a chance of the loan being repaid, hold on to it,” he notes. “How long can you hide those losses? Asset value will continue to decline in institutional hands, when it needs to be in the hands of savvy real estate operators.”
While some anticipate the gap between seller and buyer expectations will contract in 2010, highly leveraged institutional investors will continue to delay sales, unless they face debt maturities or require additional capital, says Kris Cooper, managing director of Jones Lang LaSalle’s retail investment sales practice. “Some buyers are coming around, as many believe the bottom of the market has finally been reached,” Cooper asserts. “Buyers will probably stick around for the next six to nine months before seeking better opportunities.”