The ‘D’ word has been roaming the halls of most major real estate firms over the past year or so, but how real is the distress in commercial real estate and is anybody really jumping into buying troubled assets or loans, at least in a big way? Every conversation includes the obligatory “there is tons of money sitting on the sidelines,” but the phrasing is getting tiresome to many, who would like to know precisely when some tangible action might occur.

An inkling into that answer came when Ernst & Young LLP released its latest survey of investors, which revealed that the reality is not quite meeting the hype. Not yet, anyway.

“It’s clear from what we’re being told by buyers and sellers and what we see in the market that we¹re in the dog days of distressed debt right now,” says Mark Grinis, leader of Ernst & Young LLP’s Real Estate Distress Services Group. “Unlike the 1990s when the formation of then Resolution Trust Corporation (RTC) forced the sale of bad assets and quickly set market-clearing price levels, there are very few deals happening today other than one-off distressed sales, the government’s PPIP initiative has largely fallen on deaf ears, sellers are weighing their options, and a broad spectrum of buyers are simply waiting for the dam to burst and unleash a highly anticipated wave of deals,” he adds.

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