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Promus Commercial Real Estate NewsFebruary 2011This Month's Stories: Commercial Real Estate Stabilizing2011 is starting off with a positive outlook. Office purchases are in strong recovery mode, with Real Capital Analytics (www.rcanalytics.com) reporting San Diego activity of $450 million - 50% higher in 2010 than in 2009. PricewaterhouseCoopers projects asset values holding steady this year, compared to an 11% drop last year.
With years of satisfying the nation’s most demanding commercial property owners to our credit, now is the time to reach of for the unique combination of skills only Promus Commercial’s team seems capable of providing in just the right measures. From due diligence to leasing, management to upkeep, we’ll consistently deliver the knowledge, the services, and the results every property owner needs to improve the value and return on their commercial assets. Contact Lauri Hines today at (858) 751-6300, or by email at lauri@promuscommercial.com. Learn how to maximize the opportunities now becoming available in the marketplace. Collecting Bad Debts
Seizing Accounts Receivable in Commercial Collection Cases Commercial Lenders Running Out of Patience
According to Lou Hirsh of the Journal, local companies handling distressed commercial property issues expect 2011 to be a busy year. Loan delinquencies locally and nationally were up considerably during 2010. This coincides with commercial mortgage data provider Trepp LLC, who reported 7.7% of the loan balances in San Diego County were delinquent by 30+ days in December. A year earlier that figure was 3.0%. The good news is that the commercial delinquency rate in San Diego is still lower than California’s 8.0% and the national rate of 9.2% (though higher than the 6.2% rate in Los Angeles). The local market has yet to see a flood of properties being sold off in foreclosure, largely because lenders have been trying to be patient with borrowers on well-located properties. It hasn’t been unusual for terms to be modified and maturities extended. But with a lot of commercial loans from 2005-07 now reaching maturity and the general economy again shifting gears, lenders are expected to lose patience with overleveraged borrowers. Are We Facing A Refinancing Crisis?Dave Rousseau, San Diego Lending, Inc.
Over the next 4 years there is $1.4 trillion of commercial real estate loans coming due. With property values and NOI’s down, underwriting DCR’s raised and LTV’s lowered, we are facing a re-financing crisis. Not only is there an equity gap between the amount of existing debt that is due and needs to be refinanced, but where does one turn to get refinanced? Wall Street money is virtually non-existent, life companies are very conservative and selective of new loan originations, and there’s a good chance that your bank doesn’t even exist anymore. Not only that, but Not only that, but TARP monies and another round of quantitative easing have done little to stimulate lending. According to Fitch Ratings, CMBS delinquencies are over 10% and are only expected to get worse.  Workout solutions, modifications and restructuring are playing an important to role to all sides involved.
Fresh capital coming into the deal can also be structured in many ways, such as:
At the end of the day, the new capital contribution will want you to be successful. In an effort to help you prevent getting into another default, lenders will be more flexible in making sure you succeed. This may even include reserves for TI’s and interest reserve. Of course, it’s not necessary to wait until your loan is due to restructure. In fact, it’s usually better to approach the lender before it becomes an issue. If you are feeling pressure covering your debt service now, it helps to be proactive; don’t wait until you become delinquent on your loan. If, however, you are delinquent, are in foreclosure, owe more than the property is worth or your loan is past due, it still may not be too late. Speak with a financial workout specialist team (which should include a CPA and attorney) when negotiating a source of fresh capital. Be sure they examine opportunities on a case by case basis, rather than strictly adhering to a formula that may not necessarily apply to your situation. Finally, look for a range of financial services that will be provided for a performance based fee.
Dave Rousseau, CCIM, is president of San Diego Lending. You can reach him at dave@sandiegolendinginc.com.
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The San Diego Union Tribune reported on January 6th that stronger office absorption is likely by year-end, with 2012 expected to be even better. And with office vacancies down to 18.1% and a net absorption of 1.24 million square feet in 2010 (triple 2009’s level) as discussed in the 
With the economy we’ve been living with the past few years, collections sometimes becomes an issue. We found this column from real estate law firm Kimball, Tirey & St. John to be particularly valuable, and thought you might as well. In it you’ll find ways to find the vulnerable assets of a business you’re dealing with, as well as useful alternatives suitable for your collections needs
At Promus Commercial we’ve noticed we’re handling more receivership activity lately, and the San Diego Business Journal has confirmed it’s not our imagination.
The good news is commercial space seems to be stabilizing. Yet one might logically ask what happened to that debt we were all panicking about just a few minutes ago? |
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