Distressed commercial investments could be hindered by rising interest rates

January 11, 2010 05:32PM

With interest rates and prices at striking lows, eager investors have been coming at distressed U.S. commercial real estate properties from all sides. Government-controlled China Investment Corporation, for one, has hired Cohen & Steers, Angelo Gordon and Morgan Stanley to help identify opportunities, the Financial Times reported. Last week, the FDIC auctioned off a portfolio of commercial property loans from failed banks, which went to Colony Capital for $1 billion, or 44 cents on the dollar. The fact that foreign banks, private equity firms and investment funds are taking notice of U.S. commercial real estate opportunities is a positive sign for the troubled sector, often cited as “the next shoe to drop.” Still, some marketwatchers warn, there haven’t been nearly enough deals to rival the amount of commercial real estate debt that needs refinancing, and such “bottom-feeding” activity could be staunched if and when interest rates rise. [Financial Times]

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