Workout firms making profits from distressed property
May 04, 2011
According to The San Francisco Chronicle, $181.6 billion worth of nationwide commercial loans were in default during the first quarter of 2011.
This has led to an abundance of distressed property, and "workout" specialists are surfacing with the know-how to help banks slash debt accumulated by a structure, bring in new buyers and act as a third party between building managers and financial institutions, explains the news source.
An example of a workout firm is Chicago-based Catapult Real Estate Solutions, which inspects foreclosed or bankrupt properties and offers workout strategies. The company resolves issues such as unfulfilled promises made by a previous developer, fixing structural defects and completing punch-list repairs.
"Banks are desperate to get rid of their failed real estate assets," Steve Hoavny, president of Strategy Planning Associates in Schaumburg, Illinois, tells The Chicago Tribune.
He adds that many projects in the suburban Chicago housing market approved prior to the economic collapse - between 2004 and 2007 - need to be revised, since houses during that period were too big and expensive. Today's market requires homes that sell for 25 to 30 percent less.
Ben Thypin, senior market analyst at research firm Real Capital Analytics, explains to The Chronicle that more workout firms are emerging to help struggling owners, and having a third party involved lends credibility to whatever amounts they're able to recover.