Would “distress” be considered a good thing? Absolute, if you’re a potential commercial property buyer and you’re presented with opportunities to buy “distressed” commercial properties at significant discounts.
Commercial property owners continue to face significant challenges while the economy remains sluggish, including:
Competition for tenants to fill vacant office, industrial or retail properties is still fierce in most sub markets, with tenants driving hard deals.
Difficulty refinancing existing mortgages when property values may have dipped below their outstanding debt – and many financial institutions cannot, or will not, refinance under these conditions.
Burdensome long-term carrying costs for vacant land or other empty commercial properties.
The inevitable result – somewhat delayed in 2008 through 2010 – is that banks are forcing more commercial property owners into foreclosure. In addition, stronger banks are off-loading distressed assets they acquired from failed financial institutions, often with the assistance of the FDIC.
Finding the best opportunities
Some distressed asset opportunities are listed for sale on typical commercial real estate databases, and so are widely advertised in the brokerage community. The best opportunities, however, are often for assets that are moving towards or through the foreclosure process but not yet advertised for sale. Through a combination of careful property research and having contacts in-the-know, these opportunities can be developed before they attract attention from potential investors.
Each distressed asset situation is unique.
Purchasing such properties is often more complex than a typical commercial sale transaction, and these transactions often move very quickly. Completing due diligence in the short time-frame presented is challenging. With careful financial analysis, however, the potential for gain can be huge. These “distressed asset” situations can create incredible opportunities for well capitalized buyers to purchase commercial properties at very significant discounts.
How to capitalize on opportunities.
The best opportunities are typically available to those buyers who can pay cash and can move quickly. Some opportunities may be available on select properties for buyers using financing or even a “bridge buyer” that can step in to purchase the asset quickly and hold it for the final buyer after financing can be secured.
Angel Brokers Group has developed an in-depth methodology to track and analyze the value of “distressed” commercial real estate purchases for a variety of scenarios – owner/user or investment.