CRE or commercial real estates running into foreclosures are translating into bargain investment options. According to AlixPartners LLP investment opportunities would increase so much as to mime the intoxicating days of the first years of the 90s.

Dennis Yeskey of AlixPartners said “Of course, commercial real estate fundamentals are still far from good, but I’ve never seen so much money sitting on the sidelines ready to pounce. For investors and lenders who are able to get their houses in order, from streamlining operating costs to managing capacities, this could finally be a turnaround year.”

The findings of AlixPartners (Commercial Real Estate: What’s Ahead?) points to three things that could indicate the end of the impasse in CRE.

Firstly the banks are taking steps to build up again their capital reserves. This is being made easy with the low cost of taking loans. Thus if they are able to push up their reserves they will be able to cover up their soured loans with this advantage and write these off. This would then facilitate restructure of the real debts and to see the selling off of distressed loans and foreclosed properties to eager investors.

Within the next year and half over $1.5 trillion worth of loans will mature. The paper forecasts that the debt issuances would come back – although slowly to the capital markets of the real estate group. The debts would primarily come from healthy banks as small loans, bigger life insurers, chosen new mezzanine investors, REITs , speciality finance firms and some overseas banks as well as sovereign wealth funds. Seller financing with a good dose of conservative underwriting would also make it easier to avail of loans.

Thirdly the prediction is that the bid-spreads would be narrow. CRE sellers would now be in a more comfortable position to lower the prices they would ask on the troubled units. Buyers would then be able to hike up their offers and this will narrow down the huge chasm that exists at the moment.

Yeskey noted, “We’ve all heard of the famous ‘wall of debt maturities’ out there about to hit so many industries in the next year or two. Whether real estate investments are crushed by that wall, or whether they’re able to turn it into a foundation upon which to reach greater heights, depends on acting now, not later, to get in fighting shape.”