Federal regulators haven’t put enough pressure on banks to unload poorly performing commercial real estate loans, according to a panel of industry leaders convened by the Federal Reserve Bank of Atlanta.

The trend has stifled investment sales and kept the market from bottoming out and recovering faster, observers say.

Instead, commercial real estate investors have held onto their cash until banks have failed. Once regulators took over, the FDIC seemed more willing to sell the nonperforming loans, according to a Federal Reserve panel.

“This has slowed down the market,” said Matt Tritschler, a senior vice president with Colliers Investment Services Group.

And it’s put investors at odds with banks.

“Investors don’t feel the [banks] are under real regulatory pressure to liquidate,” said Brian Olasov, a managing director with the law firm McKenna Long & Aldridge LLP.

FDIC sales in Atlanta illustrate the chasm between how banks are valuing nonperforming loans and what investors will pay for the distressed real estate.

Earlier this year, the FDIC auctioned off a $14 million commercial loan originated by the failed Integrity Bank for $4 million, according to Databank Inc.

The original loan was meant to finance Beazer Homes USA Inc.’s conversion of an apartment complex to redeveloped lots.

Integrity had valued the lots at $78,000 each. A Norwegian investment fund purchased them from the FDIC for an average cost of about $31,000 per lot.

Nationally, the FDIC has auctioned 3,768 commercial mortgage loans this year. The face value of both the performing and nonperforming loans was $1.8 billion.

They were sold, on average, at 32 cents on the dollar.

“At least it is creating a market for some transactions, ” said Colin Cavill, with Colliers Investment Services.

The Federal Reserve has said the weakened commercial real estate industry could jeopardize the economy.

The industry is suffering its worst downturn since the Great Depression, real estate think tank the Urban Land Institute said November 6. The real estate collapse has hit community banks, which typically hold a higher percentage of commercial real estate loans, especially hard.

No state has suffered as many bank closures as Georgia.

Since August 2008, 26 Georgia banks have failed. Residential development loans have contributed to most failures. However, commercial loans are a major concern going forward.

In October, federal regulators issued updated guidelines for banks dealing with increasing commercial real estate losses and distressed loan workouts.

The guidelines suggested modifying loans with prudence because it was in the best interest of the banks and creditworthy borrowers.

Critics say it’s just more relief from regulatory pressure.

The Federal Reserve panel, which met in mid-September and included national commercial real estate experts, said the soft stance is having unintended consequences.

Private equity panelists said if solvent banks don’t recognize their commercial real estate losses by writing down impaired loans, investors would wait for bank failures.

Meanwhile, Atlanta commercial real estate is beset with troubled loans, or financing that secured properties that now face significant vacancy, lease expirations, and short-term debt maturities.

About $212 million of the Atlanta commercial real estate market was in distress at the end of the third quarter, according to the research firm Real Capital Analytics.

For months, private equity investors have said they are sitting on the sidelines waiting for the right time to jump into the market and buy the distressed assets. That could help reset market values and plant the seeds for a recovery.

Some investors are frustrated. Private equity firms are seeking deals for distressed real estate. Fund managers are feeling the heat to find high-yielding investments. But some funds have liquidated and returned money to investors, given the paucity of deals, Olasov said.

The Resolution Trust Corp., a federally owned asset manager, faced similar criticism in the early 1990s during the Savings and Loan Crisis.

“The RTC also took a couple of years to gear up and start clearing the market,” Olasov said.

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Douglas Sams is a staff writer for the Atlanta Business Chronicle.