State of Distress

JOE CUOMO SENIOR MANAGING DIRECTOR

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THE STATE OF DISTRESSED Ten-X’s Joe Cuomo outlines movement and trends of the distressed market, highlighting the most desirable property classes on the platform.

With so many disparate factors related to the global pandemic and the various patchwork of reopenings affecting the economy all at once, commercial real estate buyers and sellers are looking for insights into what’s moving in the markets. Joe Cuomo, Senior Managing Director at Ten-X, leverages some of his insights to highlight this movement, particularly in the distressed arena.

Overall, Joe’s sentiment is that everyone is looking at their portfolios a bit differently and lenders are constantly assessing selling decisions based on both real estate fundamentals and the overall capital markets. Most significantly however, Joe explains that a lot of the “distress” currently being sold via lenders are deals that had issues before the pandemic; lenders are realizing that many underperforming assets pre-covid will never come back to the value level when they originally made the loan, so they are making decisions to sell and move on via REO, receiver or loan sales.

With a larger number of lender-controlled sales coming to market, here are the most desirable property classes:

RETAIL Retail is one of the most heavily trafficked asset classes on the Ten-X platform. That’s truer than ever with an expanded pool of buyers showing interest in retail, especially those in secondary and tertiary markets. Community strip centers, whether stabilized or value-add, have a defined place in the communities they support, and as a result, continue to have interested buyers. On the other hand, enclosed malls, it should come as no surprise, continue to show signs of distress, with lenders working together with borrowers to find viable business plans in the evolving retail landscape.

These niche assets continue to be appraised at significant reductions in value, adding allure for niche buyers.

HOSPITALITY

OFFICE

It bears repeating that since joining CoStar Group, all of Ten-X’s key metrics have seen significant increases.

Interestingly, Ten-X’s integration with LoopNet has driven a broader range of properties to be transacted upon on our platform, raising the number of both buyers and sellers competing for action. It’s safe to say that no matter the trends in the market, Ten-X is stronger than ever, and remains an essential tool for brokers, buyers and sellers to transact on CRE opportunities online.

O CTO B ER 2021

MORE THAN EVER, TRANSACTIONS CONTINUE ON TEN-X

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With the ‘return to normal’ underway for most companies, all eyes seem to be on the office sector. Only time will tell if businesses adopt remote work as a continued option, and therefore cut back on their office square footage. How this will play out for lenders is a core question, as losing just one big tenant can have a major impact on the property and thus the loan status. We are seeing distressed office coming to market, but at this stage the volume is less than anticipated. It appears lenders are in a ‘wait and see’ mode before moving into a major liquidation mode of their office product. More accelerated conversations with lenders are taking place, but we may need to wait 6-12 months to see if lenders do in fact re-assess their exposure and bring more distressed office product to market.

T EN-X .CO M

Auction events continue to display a sustained interest in hospitality properties; in fact, we are seeing more demand than ever for high quality limited and select service hotels in secondary and tertiary markets. As communities open back up to travelers, lenders continue to monitor less-populous areas, seeing if demand will return to pre-covid levels although, current indicators in many of these markets show that this is not the case with lenders moving to a “sell now” approach.

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