07/13/2010 | By Jason C. Flynn
The distressed debt sector is starting to show signs of life, according to Scott Schwartz, senior managing director and the co-head of commercial real estate at Marathon Asset Management.
In an interview with REIT.com, Schwartz said that while he does not believe there will be a flood of deals in the near future, troubled assets are starting to move, even in a restrictive credit market.
"There's a lack of credit in the market. Anything that is getting financed today is of pretty high quality and has strong, stable cash flow," Schwartz said. "Anything with a little hair on it, that's transitional in nature, there is not really a lot of credit available. We look at that as a huge opportunity for us to provide financing when needed. As time goes by, we're seeing more and more financial institutions start to unload their troubled assets."
Last month, Marathon acquired two commercial real estate properties via its debt operations—a residential condominium in Florida and a full-service hotel in New York. According to Schwartz, these deals fall in line with Marathon's current focus on parts of the United States that have been over-developed in recent years.
"Our focus is strictly on the U.S. We think it's the greatest opportunity at this point," Schwartz said. "We're adept at most property types in most markets. In terms of markets, we're really focused on the east and west coast and southern parts of the U.S."
Even with the slow increase in distressed assets moving out into the market, Schwartz echoed a common refrain when asked about what it will take to stabilize the commercial market.
"In terms of the commercial real estate market, I always focus on jobs. They'll be no recovery in commercial real estate without job creation," Schwartz said. "Until you see a real lift in those figures, you won't see a long-term, sustainable recovery in commercial real estate."