Discounts? Yes, but a Fire Sale? No.

A recent story in the Wall Street Journal highlights the current conditions in commercial real estate paper. The piece explains that while there are some discounts, values are staying fairly stable:

The massive market for debt tied to commercial real estate is beginning to thaw as investors flush with cash are starting to buy up billions of dollars in mortgages and securities that had been stuck on the books of banks.

“Banks are not moving their inventory at fire-sale prices,” said Noble Carpenter, head of loan sales at Jones Lang LaSalle, a Chicago real-estate brokerage and management firm.

Part of the reason is that default rates on commercial real estate remain low by historical standards. But there is also a glut of capital that was raised to buy distressed debt. As a result, many funds may not be able to achieve the low- to mid-teens returns they’re targeting — especially if they can’t borrow money to magnify their returns, according to market participants.

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