FDIC Pressure On Commercial Banks = Opportunity

The next shoe to fall in the United States are the commercial banks that will be brought down due to their bad commercial real estate loans. The big news these days is that over 100 banks have failed this year in the United States, primarily due to bad real estate loans. The FDIC (Federal Deposit Insurance Company) claims to have another 400 banks on their “problem list” and some experts say that many of those banks will fail over the next couple of years.

What does this mean for Stella Capital Real Estate Opportunity Fund? We have focused our buying opportunities around distressed situations and the commercial banks with numerous real estate loans is a great source of properties in our targets markets. We have long standing relationships with many commercial banks that are now showing us properties that they have foreclosed upon. We also work with investment sales brokers who have formed a niche business working with banks that are marketing their properties. Banks has told us how desirable we are to work with primarily for the reasons:

1) We are an all cash buyer.
2) The Fund is NOT a large institution that has rounds of committee meetings to purchase a property.....we are decision makers that after thorough due diligence, are capable of acting quickly.

Either way we are just starting to see many real estate deals that are heavily discounted and this trend will pick up as bank regulators continue to press the banks to clean up their balance sheets, or, be taken over by the FDIC. Essentially the FDIC is saying......Dump your real estate now or we are going to shut you down.