NEW YORK (AP) _ The long, brutal slide in the nation's real
estate market, a key culprit in banks and insurance companies'
financial turmoil, may be coming to an end, industry analysts say.
Some major firms report a stirring in investor interest in
commercial real estate deals. Housing prices nationwide are showing
slight gains and brokers are reporting healthy interest in the
Southwest and Midwest.
Most significant for banks and insurance companies, however, is
the apparent halt in the steep slide in commercial real estate
"I'm prepared to believe that in many of these cities, rents
have fallen as low as they are going to fall. But I'm not prepared
to say the problem is going to go away," said Karl Case, an
economist specializing in real estate with the Boston Federal
Statistics are hard to come by, but real estate analysts
suggest rents may have been cut in half since the market's peak in
the mid-1980s. Case said that decline in value may not be reflected
in the real estate holdings of insurance companies and pension
Because the property values may be sharply lower than the
original purchase price, lenders and investors may have to wait a
considerable time for property prices to rise again "to restore the
value that we've lost,"
But clearly there are encouraging developments in the real
Citicorp sold Banc One Center in Indianapolis for $115 million
earlier this year, a sign that banks can move foreclosed and
distressed properties off their books. Also, NationsBank said it
would try to sell $850 million in bad loans and foreclosed real
estate to investors. The cost of upkeep and taxes on foreclosed
real estate drains many lenders' balance sheets.
The Resolution Trust Corp. is selling bonds backed by revenues
from distressed commercial mortgages. The bonds help bring badly
needed cash into the market.
A survey by Price Waterhouse Real Estate Group in California
shows pension funds and other non-traditional investors are showing
growing interest in commercial real estate deals. Smaller groups of
investors, dubbed "bottom fishers" and "vulture funds," are roaming
the market for deals. One of the most prominent is the Zell-Merrill
Lynch real Estate Opportunity Partners L.P., which bought the
Indianapolis office tower from Citicorp.
"I'm absolutely convinced we are in much better shape today
than where we were a year ago when there was absolutely no
liquidity in the market," said Case. …