In his second ever press conference as chairman of the Federal Reserve, Ben Bernanke was asked a question about the housing market, and the Wall Street Journal published his response. Bernanke said that while lower mortgage rates and falling housing prices have helped some homebuyers, those falling prices present a double-edged sword: people are afraid of “buying into a falling market.” That’s why he called on lenders to either modify loans where appropriate, or speed the process of foreclosure, so that owners’ confidence is restored and those homes weighing down on prices are taken “out of the pipeline.” Once those homes are off the market, Bernanke implied, housing prices will no longer appear so low and stability will be restored to the housing market. [WSJ] [more]

New York Community Bank has unloaded the mortgages on Van Cortlandt Village, three foreclosed Bronx buildings on Sedgwick Avenue, in the latest in a series of note sales on distressed properties by the bank, according to Crain’s. It has sold mortgages on three dozen distressed buildings in the last year, said RuthAnne Visnauskas, deputy commissioner for development at the city’s Housing Preservation and Development, angering city officials and housing advocates.

“There’s obviously nothing wrong with a bank selling a mortgage,” Visnauskas told Crain’s, but “there should be more involvement on the side of the bank to make sure violations are getting corrected.” [more]

Ofer YardeniFrom the December issue: At times, this city can seem like an ocean of distress without a drop to drink. Half-built or unsold condos abound. Office buildings dot marginal neighborhoods offering low rents to stay full. Loans secured by real estate are in trouble all over. Yet all this distressed commercial inventory can be elusive, kept off-limits by banks waiting for a full recovery and perhaps mindful that in the last downturn, in the early 1990s, they may have let go of valuable real estate too soon. Nonetheless, some are figuring out how to wrest control of these troubled properties, and this month The Real Deal compiled a scorecard of the big private equity funds clearly leading the way. [more]

The mortgage on Joseph Moinian’s 1775 Broadway is now 60 days delinquent, and with around $249 million outstanding on the loan, the newly distressed property catapulted into second place [more]

Special servicers are getting creative with their stall tactics as the volume of distressed retail mortgages mounts, according to industry magazine Retail Traffic. Loan extensions are as popular as ever, and in some cases, special servicers are so reluctant to take back properties from their borrowers that they are granting informal extensions without asking for any additional capital. [more]

The Blackstone Group, headed by CEO Stephen Schwarzman, is well-positioned to take advantage of distressed properties as it looks for opportunities across the U.S. and abroad.

From the January issue: After sitting on the sidelines for the last two years, the Blackstone
Group, the world’s largest private equity firm, is finally starting to
go property shopping. And, as it begins to deploy its $12 billion
distressed asset fund, many in the industry are watching to see exactly
what kind of real estate it’s buying and what else it’s in the market
for. In November, the Manhattan-based firm agreed to pay about $191
million for a 60 percent stake in two malls owned by the Ohio-based
Glimcher Realty Trust, a real estate investment trust with properties
in 13 states. That followed a deal in September giving Blackstone 50 percent of
the Broadgate office development in London, the largest office complex
in the city’s financial district, for about $127 million. Also that
month, Blackstone agreed to buy 148 properties from
assisted-living-home operator Sunwest Management of Salem, Ore. If those three deals are any indication, the firm — which famously
bought mogul Sam Zell’s $39 billion Equity Office Properties portfolio
in 2007 and successfully flipped much of it before the market soured –
will be spending the rest of its $12 billion across multiple sectors of
the market. more

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.

As the economy braces for what could be an increase in commercial property foreclosures, Robert White of Real Capital Analytics led PBS “NewsHour’s” Paul Solman on a tour of some of Manhattan’s at-risk commercial properties. White said that over-exuberance and optimism led to overpriced commercial towers with little equity. Developer Harry Macklowe’s Worldwide Plaza, for example, which was priced at $1.7 billion, was traded a month ago at a little under $600 million, in part because the building was around 50 percent vacant when it was sold — something few anticipated. “The market was full of such optimism that rents would keep increasing and the buildings would stay fully leased,” White said. “The economy was still growing, banks had a lot of money to lend and there were many investors who also wanted to be in commercial real estate.”

Simon Development Group, which helped open the Hill Country BBQ Market in Chelsea, is starting an opportunity fund for investors interested in distressed properties. The five-person team manages, redevelops and constructs residential properties, including Tower 31 at 9 West 31st Street between Broadway and Fifth Avenue. Its new fund, which has a target value between $50 million and $100 million, is the first for the nearly 20-year old group. The Durst Organization, among others, also recently stepped into the distressed assets field. Matthew Baron, a principal at Simon, is unflappably optimistic about the pursuit, insisting that the time is right for his group to initiate the fund. Note: Correction appended [more]