In this week’s installment of the new program Insights from The Real Deal, Robert Knakal, chairman of investment sales firm Massey Knakal Realty Services, says he anticipates a rise in distressed asset sales over the next 12 months. That would continue an upward trend that began this year, following a slow 2009 in which few commercial properties that were in default, foreclosure or bankruptcy, traded hands. “In 2009, the volume in the distressed asset area was very low, primarily because banks were simply not in a position to deal with their distressed assets,” he says. “We fully expect that activity in 2011 will be significantly in excess of 2010.” (Have a comment about The Real Deal’s new Web feature? E-mail Lauren Elkies at le@therealdeal.com.)

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From the December issue: In what may be an attempt to live up to its name, luxury condo developer Alchemy Properties plans to invest in the development and rehabilitation of distressed properties. With a new initiative in place to invest in the properties, Alchemy will target partially finished developments and overleveraged rental-to-condo conversions. Although the down market has spawned a number of distressed asset investment programs, Joel Breitkopf, a partner at Alchemy, said he’s confident that his firm’s initiative — it’s not a formal distressed asset fund — will stay ahead of the pack. He says that an understanding of the numbers behind residential development gives them an edge over other investors. “When a developer is under pressure, they tend to cut corners and their subcontractors tend to cut corners,” Breitkopf said. He said that his firm’s hands-on experience evaluating potential developments will help it avoid dangerous, poorly constructed investments.

From the October issue: Brooklyn’s official motto may be “Fuggedaboutit,” but the borough’s
real estate industry is not having an easy time shaking thoughts of
double-digit price drops and troubled residential projects. Overall,
the median closed sales price in Brooklyn has already fallen back to
2005 levels, dropping 19 percent over the past two years, according to
StreetEasy. Rental listing prices dropped 12 percent over the past
year, not including all of the concessions landlords are throwing in
these days. Meanwhile, a city tally early last month found that
Brooklyn had more stalled construction sites than any other borough
with 214 — a stunning 47 percent of all 448 projects citywide. What’s worse, most experts agree that the market has yet to reach bottom.

From left: K. Thomas Elghanayan and brother Frederick started TF Cornerstone

Now that the division of Rockrose has been finalized, the two younger Elghanayan brothers are looking to snap up distressed assets. “Our plan is to look for properties that are in some form of incomplete state,” K. Thomas Elghanayan, who with his brother Frederick is now doing business under the name TF Cornerstone, told The Real Deal.
“We can take something that’s half-built and we can finish it, manage
it, rent it out, sell it, and do whatever we need to do. We’re looking
at a couple of opportunities like that, where we’d be buying these
[properties] from financial institutions.” In fact, he said, TF (for Thomas and Frederick) Cornerstone is close to making a deal on two properties in the New York metro area: one is a “broken condo,” and another is a development deal where construction started and stopped. [more]

Sam Zell has put together a $625 million fund to buy distressed securities, including those backed by commercial real estate. Zell filed a notice last month to create Zell Credit Opportunities Fund, which began raising money in July. He sold his real estate empire, Equity Office Properties Trust, to Blackstone Group for $39 billion in early 2007, at the height of the market. Zell has called himself the “Grave Dancer” for his ability to make a profit off of troubled assets.