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Tuesday, Jan 31, 2023
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Commercial Firms Vie to Do Distressed Assets Deals

Distressed assets. Foreclosures. REOs. Some of the most feared words in residential real estate are now cropping up in marketing plans and press releases for local commercial brokerages, large and small, despite few commercial properties falling into these categories so far in the greater Valley region. “Opportunism,” said Mike Zugsmith of the distressed assets bandwagon which his company NAI Capital has happily jumped on with their Accelerated Marketing Program, i.e. a nationwide online auction. “We’re just not seeing this as anything other than a temporary opportunistic situation that’s not supported by any data we’re seeing, and we’re certainly not seeing it in the San Fernando Valley.” He said that rather than experiencing foreclosures, what NAI is dealing with locally are mainly property owners who need to refinance, clients who are having problems with tenants, or those who want to reposition assets to better fit their current portfolio needs. “I don’t want to sound like Pollyanna, or that I’m looking through rose colored glasses,” said Zugsmith, “but with the fundamentals of our region it just doesn’t seem to me that we’re going to see a substantial number of properties in real trouble.” His optimism springs from the fact that California now has a budget, “whether you like it or not, it’s a certainty,” a Screen Actors Guild strike has been averted, and the region’s population is still growing. “People still perceive Southern California as a place they want to go to,” Zugsmith said. “This growth factor creates a need for a place for people to live, place for people to work, to shop, to eat.” That viewpoint is in direct contrast to that of Conrad Andersen, executive managing director of the Financial Services Asset Management Group of Grubb & Ellis. “Our indication is that there is going to be a significant amount of defaults throughout the U.S. in the commercial real estate loan sector,” said Andersen. “There’s currently $3.2 trillion in commercial real estate loans nationally and some percent of that will go into default.” But how does that translate locally? “Southern California is a major hub for commercial real estate lending and our belief is that over time we will see a significant increase in foreclosures and real estate owned in Southern California, including the San Fernando Valley,” Andersen said. That’s why he will be moderating a seminar on March 5 for lenders and other stakeholders designed, said Andersen, “to address the magnitude of the problem and also to discuss workout strategies such as bankruptcy law, the receivership process, and how a lender can preserve their collateral.” Marcus & Millichap also believes there is ample opportunity to offer services related to distressed assets. In November they named Scott Lamontagne as western United States director of the special assets services division. That’s in addition to his duties as regional manager of the Encino headquarters office, a post he was promoted to just this month. “The purpose of the division,” said Lamontagne, “is to provide support to lender clients that are now very active in distressed markets by representing them on the sale of REO assets, pre-foreclosure consulting, pre-consultation on note sales.” Although those who are in the group may not be devoting their full-time efforts to just distressed assets, he said that as many as 30 percent of Marcus & Millichap brokers nationwide will be engaged at some level. “I think one of the biggest things right now that the lenders are having to deal with is changing their business models,” said Lamontagne. “It’s not like they have these huge staffs to handle distressed assets. They’re basically converting sales people who were producing loans who are now in the back office trying to do workouts.” Marcus & Millichap will be hosting an event on March 25 for REO executives, bank asset managers and credit officers involved with special assets (another bank term for REO or distressed assets). “At least every other day we get a call from an investor that’s changed their model or a syndicator that’s created a distressed asset fund, looking to take advantage of the opportunity,” said Lamontagne. “Before, somebody was selling the properties, and now they’re buying. It’s a natural cycle; the nature of the beast.” The question everyone wants answered is when we’ll hit the bottom of this mess. Zugsmith said he thinks we’re either already there or close to it. He said he knows his view is contrarian, but he believes Southern California was first into the hole and will be one of the first to come out. Lamontagne believes that’s at least partially true. “The bottom is going to be individual. Certain pockets, even in a very down market, are going to be very resilient,” he said. “It will vary from location to location or even micro-location. We can’t generalize, it has to be looked at on a very local basis, especially in this area where we have so many micro-economic areas.” Scholarship Opportunity The Commercial Real Estate Women Network is currently accepting applications for scholarships to be awarded to women who are planning careers in the commercial real estate industry. The funds are intended to help finance the education costs of undergraduate students who are in their junior or senior years. As many as 10 scholarships of $10,000 may be awarded and recipients will also have the opportunity to complete an internship at a CRE brokerage and participate in the CREW Network e-mentoring program. The application deadline is March 20. Staff Reporter Linda Coburn can be reached at (818) 316-3123 or at lcoburn@sfvbj.com . LeIn the first transaction, industrial specialist Brent Weirick, a senior vice president in the Colliers International Encino office, worked with Coach USA which sublet a 3-acre parcel in Sylmar from Transportation Concepts. Coach will use the property to park and service its fleet of buses. The second transaction had MV Transportation leasing 2.5 acres of bus yard space in Van Nuys from property owner Newman & Sons. According to Weirick, who represented MV Transportation, the company will use the space to provide services for a LADOT contract. Mike LaRocque of Daum Commercial represented the lessor. Moorpark Gets Bubbly New Tenant Pepsi-Cola Fountain Company will be consolidating its space into a 315,000-square-foot space in Moorpark previously occupied by Aldik Artificial Flowers. Landlord G & S; Investment LLC was represented by CB Richard Ellis brokers Craig Peters, Bennett Robinson and Doug Sonderegger. Terms of the transaction were not released.

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