The State of Distressed Commercial Real Estate
Scott Rechler, CEO of RXR Realty discusses distressed commercial real estate in an interview with CNBC. Rewind back to the 4th quarter of 2009 and we kept hearing that blatantly over used catch phrase, “Commercial Real Estate, the next shoe to drop”. I refuse to even utter the footwear/CRE description, frankly because I got so tired of hearing it from the media, but I digress.
In the interview, Mr Rechler makes some solid points about the size of the CMBS market today and raises some key questions as to who will fill the void in the debt market for the massive amount of commercial real estate that will need to be re-financed. The volume of distressed real estate on the market that some predicted would materialize in 2010 has yet to occur.
“There is a tremendous amount of distress that is not really visible yet,” said Rechler in the interview. He goes on to suggest the big players and corporations sitting on a ton of capital, and who have the ability to infuse equity into these commercial real estate assets in order to meet the lenders book values are best positioned.
For the large corporate tenant who is sitting on a ton of cash, is this the opportunity to look at owning office assets as an occupancy strategy? Is ownership more attractive because of the new lease accounting standards to be adopted?
What is your take? Has the CRE debt crisis been avoided or just delayed?