Vulture funds readying plays for real estate

By Emily Chasan

NEW YORK (Reuters) - Hoping to profit from the burst of the housing bubble, distressed debt investors and vulture funds are starting to hover over residential real estate, a top New York real estate executive said on Tuesday.

Even in Manhattan, which is among the few U.S. real estate markets to remain buoyant, distressed funds are beginning to aggressively look at troubled properties, Pamela Liebman, chief executive of New York real estate brokerage The Corcoran Group, told the Reuters Housing Summit in New York.

The funds are not interested in individual homes, but rather unsold inventory in large apartment buildings, Liebman said. "There's a lot of distressed funds being set up to come in and scoop up buildings," she said.

"I have people calling all the time, saying I'll buy all the unsold inventory in the buildings, I'll hold it and rent it and sell it in a couple of years."

America's subprime mortgage crisis sparked by an easing of underwriting standards in the home loan industry and a drop in housing prices, has created opportunities for vulture funds where for years there were none.

Those who bought in at the top of the housing cycle for investment purposes are among the most desperate to get out -- and some of the best targets for the distressed funds, according to Liebman.

"If people were just buying to flip and there's no one to flip to, they can't afford to hold them, so they're better off walking away," Liebman said.

Developers are hesitant to sell at a discount, Liebman said, but the vulture funds are not waiting for housing markets to show signs of improvement, especially in more distressed areas like Florida, according to Liebman.

"In Miami, several vulture funds have set up. They will come in and buy it and position it for future rental," Liebman said.

(Editing by Gerald E. McCormick)