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We are entering the next stage of the commercial real estate cycle. With credit still scarce and commercial property owners being squeezed by falling prices, the vulture funds are coming together to pick at the remains.

Vornado Realty Trust, the 3^rd largest real estate investment trust firm in the United States, is putting together a billion dollar fund to buy up distressed properties. The fund and others like it will set the base of the commercial real estate market by buying up the properties of investors that are overextended.

Interesting how the commercial market free from government intrusion has dropped quickly but will also stabilize quickly as the rules of free market are allowed to work. Meanwhile, the residential market is mired in government programs that keep the pain alive.

“People are readying themselves for the buying opportunities that are going to open up,” said Steve Coyle, a fund manager at Cohen & Steers Inc., a New York-based investor in real estate securities. “Private guys are going the public route and then you’ve got public guys raising private funds.”

Vornado, which owns mainly office and retail properties, is one of about 50 REITs that raised a total of $15.7 billion from equity sales through June 26, according to the National Association of Real Estate Investment Trusts, the trade group based in Washington. Vornado completed a $741.8 million stock sale in April with proceeds earmarked for cutting debt and making acquisitions. via  Bloomberg.com.

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