Be Patient, Market Distress Will Create Variety of Real Estate Opportunities

By Eli Green, Vice President of Investments, Carter

Green_Eli-2010I recently had the opportunity to sit on a commercial real estate panel to discuss the “10 Things You Need to Know About Distressed Assets” from an investor’s point of view. The educational discussion, sponsored by the Atlanta Commercial Board of REALTORS took place in June.

The panel comprised myself, an attorney specializing in representing special servicers, a special servicer/asset manager and a broker with significant experience dealing with distressed assets. They were Chad Defoor, an asset manager with Trimont Real Estate Advisors, Harrison Coleman, a partner with Coleman Talley and John Leonard, Regional Director with Marcus & Millichap. Lance Healy, Cushman & Wakefield leasing manager, moderated the discussion.

As an owner/operator, we believe distress in the market will create a variety of unique opportunities for Carter over the next few years. Our investment strategy is to position ourselves to make strategic investments in office, industrial and mixed-use assets across the Southeast where we can leverage our operational platform and maximize our investor’s returns. In addition to investing our own capital, through The Carter Real Estate Funds, we generally partner with private and institutional investors who are seeking to align themselves with owner/operators like Carter who are stable organizations with a proven operational and investment track record.

There was significant discussion regarding the distressed asset acquisition process, which is often very unique and complicated.  One of the most important things to understand in the process is the seller.  Who is actually in control and what are their motivations?  Sellers of distressed assets range from owners/developers, banks, special servicers to bankruptcy auctions, to name a few.  Three years ago, sellers were focused on maximizing their gains, but today many sellers are focused on minimizing their losses.  Another consideration is the timing associated with the different level of required approvals resulting from the variety of parties involved in the deal on the seller side, like borrowers, lenders, etc.

Another topic focused on Atlanta’s distressed office market.  As everyone knows, this distress was ultimately caused by the confluence of easy money, job losses, overbuilding and corporate contractions. Overall office vacancy rates are higher than they’ve been in over 10 years, and we are still experiencing negative net absorption.  Until we see significant, sustainable job growth, this distress will remain.

Despite the challenges, though, distressed assets present opportunities for well capitalized investors.  Similarly, brokers have an unprecedented opportunity to add value to these complex transactions.  However, everyone involved has to be willing to roll up their sleeves, expand their areas of expertise, think outside the box and, most importantly, be patient!

As vice president, Eli’s primary focus is day-to-day management of The Carter Real Estate Funds. His responsibilities include acquisitions, due diligence and financing of the Carter Real Estate Fund investments. Since joining Carter, Eli has been involved in the acquisition, development, financing and disposition of over $900 million of office, industrial, retail and residential properties in Georgia, Florida and North Carolina.

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