For James and Steve Donell, the downturn in the local commercial real estate market is proving lucrative.

The father-and-son duo that run Jalmar Properties specializes in managing properties that enter into court-ordered receiverships after notices of default are filed.

While most of the boom in the West Los Angeles company's business has come from the surge in distressed residential properties over the past couple of years, the last 90 days have brought an increase in commercial properties.

"We're seeing a lot of smaller office buildings purchased in the last two or three years where the owners are now having trouble paying their loans," said James Donell. "The lenders file notices of default and that's where we come in."

Donell said he expects the number of calls to manage commercial properties in receivership to soar in coming months as the slowdown grips the commercial real estate sector.

Jalmar is one example of a local real estate company poised to benefit during the commercial real estate downturn. Others include businesses that have amassed significant bundles of cash and are waiting to pounce on bargain properties traditional bottom feeders.

Among this group are two local companies: Brentwood-based Mesa West Capital and Beverly Hills auction house and real estate services firm Kennedy Wilson. Mesa West Capital has raised a $1.5 billion fund, while Kennedy Wilson recently announced a joint venture with LandCap Partners that starts with $100 million to purchase distressed residential properties.

"If you have cash, it's a wonderful time to buy," said Steve Cauley, director of research for the Ziman Center for Real Estate at the UCLA Anderson School of Management. "It might not be the absolute bottom, but it's certainly an attractive time to buy. If you buy commercial real estate today, the likelihood is that five years from now, you'll be happy that you bought today."

Vulture investing

That's precisely the strategy at Kennedy Wilson, a Beverly Hills real estate auction house that has its eye on the investment side.

Earlier this month, it joined forces with LandCap Partners, an L.A.-based real estate finance company, to create a $100 million equity fund "to purchase completed homes and condominiums which homebuilders and financial institutions are holding in inventory or which have been foreclosed upon by lenders," according to a joint press release.

One Kennedy Wilson executive said that for now the venture is limited to homes, either in individual projects or as part of portfolios held by builders or lenders.

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