Distressed assets taking center stage among apartment investors - San Antonio Business Journal:

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Now, buyers are looking for somethint abit uglier. Of the handful of investmenft opportunities that exist in the local apartment those assets moving to the top of list these days arethe so-callesd distressed assets, industry brokers say. Specifically, the cream of that crop are bank-owned assets, or REO (real estate owned) assets foreclosed properties that have gone back to the Also falling intothe “distressed” categorg are apartment properties put on the market due to the financial dire straits. Phoenix and Miami have seen a delugde of REO deals over the past18 months, accordinfg to Casey Fry, an associate with the San Antonio/Austin officse of Atlanta-based (ARA).
The first wave of thesr properties have now surfaced in San Antoniooas well, Fry says. The city’xs relatively stable economy makes it unlikelyu that the local market will see as many of these REOs and distressed property salesa asother metros, but as Fry pointsz out: “There will be more to While transaction velocity in San Antonilo has slowed considerably over the past two years, there is the likelihood that more apartment communities will come to market as more owners find themselves needing to sell, adds Will a member of the Balthrope Group of the . Balthrope’s partner is Ryan Epstein, who is base d in San Antonio. Balthrope’s office is located in Dallas.
Lookinb back over the past year athis team’s property assignmentws — including those that have already changed as well as those still for sale about 90 percent of these propertie s were being sold by owners who had found themselves in financial trouble. Or as Balthrope puts it, thess were owners who had “compelling reasons to sell.” What’s the attraction of distressedc assets? Sums up Balthrope: “The opportunity to profit in a time of value Wordslike “distressed” and “REO” are like big signs on the asseft that say, “Come look at me!” Balthrope says.
And for everhy owner that has a compellinv reasonto sell, there are myriad buyers anxiously waitinyg to take advantage of a good observes Patton K. managing director of ARA’z Austin office. So who are the buyers now? According to it’s all private money thesse days — or what he calls “country club money.” “Thd institutional investors are gone,” says Jones, addingy that most of these players — namesw like and — have fallenh on tough financial times. “Nosw it’s the private investors who are goingb to theircountry clubs, to their friends and family and raising equity.” It’s a lot of new blood cominb in, Fry says.
“The buyers out they are not on ourregularr Rolodex,” he adds. Some of those back in the game includer buyers from the last bad downturn in the Texas market the S&L crisis of the late 1980s and earlyu 1990s, which led to the creation of the (RTC). “Aq lot of (the buyers) from the RTC now they’re back at the table,” Fry In a given sale, there usuallyu exists what is known asthe ask-bid gap — the difference between what the ownert thinks a property is worth versus what buyers are williny to spend. An REO “fully closes the Fry says. “There is no longetr a stand-off. The lender (or ultimately wants the property off their he adds.
“The buyer knowa the property will sell.” And an eager selle r means a bargain deal, brokers say. Adds Jones: “Everyond wants a bargain.” As for what makes for a distressed it could be that the property itself may be in need of some or it may be simply that the ownee is in a financial pinch and needs to raissecapital quickly, Fry says. Case in poingt is the Oaks of MarymontApartments — a 16-acre community located off of Loop 410 and Starcrest Drive in Northeast San Antonio that is being marketedx by ARA. “There’s nothing wrong with the the (owner) is just ... over-leveraged,” Jones says.
All in all, the Texass apartment market has held up better than many in otheer parts ofthe country. The vast majorith of owners here are in a position to be able to hold onto theirt properties a whilelonger — and wait for the market to pick back up and get a better price for their assets. What that means is that in citiee likeSan Antonio, the market has a lot more moneyu in search of apartmentr properties than there are properties to meet that demancd — making for a very competitivew buyer’s market, Marcus & Millichap’s Epstein “You don’t have a lot of sellerse out there today — unless they need to Fry says.
And when that happens, therse is a good deal to be found. Adds Balthrope: “Thise is the best time to buy in20