Buyers smell blood in the water as distressed commercial properties are put up for sale. But so far, sellers of that troubled real estate are refusing to accept rock-bottom values. With developers filing for bankruptcy protection or lenders forcing their projects into receivership, the number of available properties is on the rise.
And, certainly, sales are up substantially: Over the first half of the year, there were $803-million worth of distressed commercial property sales in Canada, according to commercial real estate brokerage Colliers International Group Inc. That is more than double the amount from the first six months of last year. “It really started to pick up at the end of last year and really kind of took off in the first quarter of this year,” said Jeremiah Shamess, who started Colliers’ private capital investment group and is working on about a dozen distressed asset sales, compared with three in the previous year.
Still, real estate pros say there’s a disconnect between buyer and seller expectations. If the two sides start to come together, the number of transactions could boom – particularly as defaults are expected to increase. More troubled properties are expected to hit the market as real estate companies struggle with higher borrowing costs and miss their loan payments.
Lenders are losing confidence and are increasingly pushing their borrowers’ projects into receivership. Jeffrey Berger, managing director of insolvency firm TDB Restructuring Ltd.