Mapping Out the Market
Distressed is the word almost anyone would use to sum up the current commercial real estate market. But CCIMs like Ron Opfer, director of commercial assets for Coldwell Banker Premier Realty in Henderson, Nev., choose not to view the down side of this cycle. Equipped with cutting-edge market analysis skills, industry-leading technology tools, and a vast member network, “This is our time to shine,” Opfer says. “This market was made for CCIMs.”
In October 2009, Opfer received one of the first ESRI/CCIM Institute grant awards for his proposal to create analysis tools for the distressed asset market using ESRI’s geographic information system analytical software. Commercial Investment Real Estate asked Opfer about his innovative plans.
CIRE: Why did you apply for an ESRI/CCIM grant?
Opfer: I’m an avid user of STDBonline and all the applications available to CCIMs via this member benefit. As the special asset solutions division of my company began to grow last year, I discovered that many of the asset managers didn’t have enough information about the distressed properties they were managing or the markets in which they were located. I wrote a grant application based on the principle that banks are going to be the new owners of commercial real estate but lack the sophisticated analytical tools necessary to understand the properties they own.
CIRE: How have you used your ESRI/CCIM grant resources?
Opfer: While it’s still a work in progress, the analytical platform currently includes layers that show the distressed asset along with notices of sales, foreclosures, closed sales, active properties on the market, and properties active for lease within an ESRI map that includes parcel numbers, owner information, zoning information, and all the standard layers available on STDBonline. I can produce maps and information that, with one look, give bank asset managers an instant understanding of where the property is, what the competition is doing, the latest NOS and notice of default information, and the property’s value. The data is constantly updated so that at any given time you can look up the property to get the most current market information.
CIRE: What can banks — and commercial real estate professionals — learn from analyzing distressed market activity?
Opfer: The ESRI analytical platform can look at any property with map overlays showing the property and how it relates to every conceivable layer. The platform crosses all disciplines of commercial real estate, so it provides insightful information about the property and market. Combine this with on-the-ground CCIM broker expertise and the banks now become some of the most informed commercial real estate owners in the country.
CIRE: Can you give us an example of how banks use this information?
Opfer: Banks know that if other banks are foreclosing in the same area, the first one to the market will yield the highest price. The analytical platform is helping banks understand which submarkets are most likely to be in trouble in the next six months, thus providing knowledge about when their assets should go on the market.
It also is helping banks with very definable and easy-to-understand pricing trends. We can see, for example, that finished bulk residential lots fell to a low in September 2009, and the subsequent sales have been at higher prices. We also can quantify the supply and estimate when it will be absorbed. Understanding and mapping these trends helps banks earn more for their assets.
CIRE: How did you get involved in the distressed assets niche?
Opfer: I started out on the development side. Late in 2008, I started helping banks analyze properties for FDIC auctions. In 2009, I began working with Realogy Global Client Solutions, our parent company, to form a special assets division. In summer 2009 we solidified our relationship and today I direct all the commercial activities for the special asset department.
CIRE: What differences are you seeing in today’s distressed deals versus those of a year ago?
Opfer: The first major difference is that there are now legitimate post-recessionary sales comps for appraisers and owners. In 2009, most of the sales information occurred in an earlier cycle of real estate that provided little value. But they did serve a greater good. These 2009 appraisals helped the extend-and-pretend strategies deployed by many banks.
CIRE: Do you have any market predictions for 2010?
Opfer: In 2010, things will be different. The mandatory appraisals that the FDIC demands will be more reflective of the properties’ actual values and that will put a lot of pressure on banks to develop more-aggressive disposition programs. Already the FDIC has written letters and issued memorandums on this subject.
The appetite for distressed properties also is growing both on a financial-market level and local-investor level. The price expectancy gap will get smaller and investors will begin to take these assets off the banks’ hands. I don’t expect there to be a price rebound anytime soon, but I do expect that, with a greater understanding of each individual bank-owned asset, pricing will improve to a point where it meets the requirements of the investors.