Bank cleanup delayed: Where are all those fish that were supposed to be in the barrel?

Earlier this year, commercial real estate had all the hallmarks of a distressed asset sale of the millennium. Across America, hundreds of billions of dollars’ worth of office buildings, hotels, apartment complexes and malls were tanked up with debt and rapidly tanking in value. They were so far under water, conventional wisdom had it, that there was no way they could be refinanced. Wholesale foreclosures would follow. Banks would be forced to unload properties at bargain-basement prices.

… [this blog only includes excerpts from article written by Matt Miller – please visit to read full article]

However, few properties have been foreclosed on — perhaps 10% of the defaulted loans, according to some estimates. Even fewer distressed sales have taken place. Distressed investors “thought it would be like shooting fish in a barrel,” says a lawyer who represents both financial institutions and real estate interests. “A year later, they can’t find the fish.”

[BLOGGER COMMENT UPDATED 10-1-2011: In the wrestling match between lenders with REO portfolios and private capital looking for opportunities high yield investment opportunities it looks like we know who will blink first, the capital. Private equity groups have raised billions looking for IRRs of 15-30%. Financial institutions that control the REOs and mortgage debt on trillions of dollars of non-performing, sub-performing or defaulted commercial real estate loans have no “gun to their head” to sell the assets. Over the last 3 years many private equity groups have returned money to their investors without being able to find investment opportunities that can hit hurdle returns. Other allocators of private equity have started investing in riskier investments including land in order to get their desired yield.]