Fair Warning
The Financial Times reported yesterday that Morgan Stanley and Wells Fargo have issued warnings that the trouble in the commercial real estate industry continues to mount. Some key points from the FT article:
- Morgan Stanley takes a $700 million CRE write-down in the 2nd quarter
- 3rd straight quarterly loss for Morgan Stanley
- Wells Fargo states non-performing loans jumped 69% in the 2nd quarter!
- Wells Fargo now has $7.6 billion in non-performing CRE loans
All signs are pointing to bigger and bigger losses to come (duh). I met with the VP in charge of REO of a major commercial real estate lender this morning to discuss potential sale/investment opportunities. As I have been saying, there is a flood of properties coming back to banks and the momentum will pick up steam in the next 6 – 12 months. His major activity is in the Las Vegas and Phoenix markets at this time but Southern California is on the not-to-distant horizon. He led me to believe that they are all ears right now when it comes to selling notes. This makes total sense as the bank is freed from the shackles of foreclosure, receivership, property and asset management and the million other responsibilities that come with inheriting a property which the bank knows little about. (It should be noted that this is a healthy bank which is capable of handling the impending losses it will soon be facing. I do think my conversation would have been much different with a not-so-healthy bank.) It seems to me that note sales will soon be gaining momentum and may even have a significant impact on the availability of REO properties available as investors clamor to be the first to the party and avoid competitive bidding situations. That being said, there will be no shortage of opportunities to sift through very soon, although not soon enough for most in the industry.
To quote from Mel Brooks’ Spaceballs:
“When will then be now?”
“Soon.”
Hang in there. Better times are ahead for us all.
