This week’s perspective is provided by Jim O’Connell:
Value-add real estate is still a very competitive commodity in our world. There are value-add deals being negotiated and closed everyday on troubled real estate assets. We just closed on the sale of a 500,000 square foot value-add asset last week.
In Wednesday’s WSJ there was an article in The Property Report with the headline, “Investors Bemoan Lean Results From Workouts”. In that article they cover complaints from investors in the notes on these troubled assets who believe the special servicers are not doing a good enough job. On the other side of the argument are the servicers saying they are having their own troubles making the system work for them, too.
I understand both sides of the issue, but I can see why investors in these loans and notes are questioning and complaining about the way the special servicing companies are going about their business with these assets. Can you really blame investors for being skeptical about how it appears these deals are getting done? In similar fashion, look at the way the financial markets continue to operate. What about the most recent JP Morgan issues? When it comes to the world of big money and big payoffs, who can blame the people on the sidelines, especially those with vested interests, for being concerned over the way these deals are being transacted.
We are going to see the transfer of a lot more of these troubled assets, and much of it is going to be transacted by the special servicers. Be they note workouts or sales of foreclosed properties, these assets are going to be put into new hands to be owned and operated so that the capital markets world can move forward. And in the end that is the huge job that the special servicers have undertaken and perform to their best ability.