Hugh Balloch of Chase Manhattan Corp. knows a thing or two about selling real estate, and he says the market is back.
Mr. Balloch, a vice president at Chase, has been instrumental in reducing the bank's portfolio of bad real estate loans from more than $10 billion a few years ago to roughtly $2 billion today.
A horbe of new investors has surged into the market, inproving prices considerably, Mr. Balloch told a meeting on real estate disposition sponsored by Coopers & Lybrand.
He and other speakers said that a sellers market for bankowned real estate has developed, and that banks are increasingly involved in financing the sales.
In one indicator of how active the market has become, there were three conferences on bullk real estate sales scheduled in New York this week, noted Jeff Mortara, vice president of BT Securities, a unit of Bankers Trust.
Because of the competition, Mr. Balloch said, prices have increased, but so have returns. Sophisticated investors, attracted by yields of 12% to 15% on a deal, are eager to pump fresh capital into real estate, he said.
Mr. Balloch said that investors are increasingly likely to push for closed bids to limit the number of participants, thereby reducing the price.
But in a seller's market, other options are open to the banks.
In addition to sealed bids, these options include public auctions, securitization, or a combination of the two, said Ralph Rose, associate director for Bear Stearn & Co.
More Financing Opportunities
For banks, an active market also means there are more financing opportunities available, said Mr. Mortara. In addition to BT Securities, Shawmut National Corp., NationsBank Corp., and Fleet Financial Group are now actively financing deals, he said.
Real estate has come full circle, said Tom Hollowall, a senior manager with Coopers & Lybrand. The regional banks hurt during the real estate bust are now financing the real estate dispositions of other banks, he said.