Alan Levan is un-distressed

Late Innings'

The outlook for investors looking for opportunity in toxic bank assets is clouded. The FDIC isn't an active seller, and many banks have been reluctant to take the hit to their capital that selling entails. Improving bank earnings and financials, and a reviving real estate market, have slowed sales, too.

Real Capital Analytics reports $26.2 billion in troubled commercial real estate loans and foreclosed real estate has been worked out in Florida's major metros since the start of the recession, with recovery rates ranging from lows of 56% in Jacksonville and southwest Florida to a high of 66% in Miami. Through the first part of the year, in every market tracked, other than Jacksonville, the pace of resolutions exceeds that of new problem loans.

"There's less supply," says Joseph McBride, an analyst with Trepp, a New York-based commercial real estate and banking information firm.

A smaller supply, however, is relative. In south Florida alone, according to Trepp, $927 million in commercial real estate loans was 60 days past due in July, ranging from a Miami Beach boutique hotel with a $103-million debt to a small apartment building in Hollywood with less than $1 million.

Real Capital Analytics as of July still was tracking $12.3 billion in commercial real estate loans in default or in special servicing in Miami, Palm Beach, Tampa, Orlando, Broward, southwest Florida and Jacksonville. Ernst & Young also notes that billions of dollars in commercial real estate loans will mature nationally over the next five years.

For investors in search of high yields, "you're in the late innings," says Kingsley Greenland, president and CEO of Boston-based loan advisory firm DebtX.