The commercial real estate downturn skirted the sidelines for the first three years that residential markets were declining in 2006-2008, but once it hit, it hit hard. As the following chart indicates, commercial property values were on a steady uphill climb throughout most of the past decade – peaking in February of 2008, and then dropping precipitously through 2010. 

Today we are facing trillions of dollars in underwater commercial mortgages, threats that foreclosures will flood the market and further depress values, and questionable accounting practices that mask reality while delaying the commercial market’s recovery. 

 While residential mortgages are typically financed over 15 to 30 years, commercial mortgages tend to be refinanced every three to seven year years. Studies by Deutsche Bank indicate over one half of these loans made during the 2000-2008 commercial run up in values are either non-compliant or non-conforming and will face extreme difficulties in qualifying to be refinanced . The stop-gap strategy adopted by most commercial lenders today however has tended to be one of “Extend and Pretend” that the loan is compliant and no loss in principal value has taken place.  

Continue reading ‘U.S. Banks: Time to stop “Pretending” and start “Amending”’

With every challenge there is an opportunity. In 2010, there are opportunities for commercial brokers who are equipped to engage with REO assets. Consider the state of the market:

• The percentage of loans that are at least 30 days past due in the Commercial Mortgage-Backed Securities (CMBS) market rose higher than 6 percent for the first time ever at the end of 2009, according to mortgage research firm Trepp LLC.

• CMBS delinquencies have skyrocketed, posting a 502 percent jump over the 1.21 percent delinquency rate from just a year ago, Trepp reports.

That translates to an unpaid balance of CRE-backed bonds of $37.93 billion, according to investment rating agency Realpoint LLC. And that, in itself, is a 440 percent increase since November 2008. Continue reading ‘The Commercial REO Opportunity’

The commercial real estate market has changed – and is changing. Although many believe the market still hasn’t hit bottom, one thing is certain, commercial real estate brokers need new skills in order to thrive in the face of current market realities. Beyond the tried and true relationship strategy, I believe commercial real estate brokers need to focus primarily on honing their business development skills.

Just because the commercial real estate market is shifting doesn’t mean brokers should shift into panic mode. As Gary has shown us in SHIFT: How Top Real Estate Agents Tackle Tough Times, there are always opportunities in the midst of challenging environments. So, if you maintain a business development mindset and keep your foot on the accelerator, you are more likely to discover and leverage those opportunities to your advantage.

Before you can hone your business development skills you need to understand what business development is – and what it isn’t. Business development is not merely sales role, it combines sales, marketing, strategic analysis and negotiations to accomplish one goal…building new relationships with potential clients.

Continue reading ‘Business Development: The Hottest CRE Skill for 2010′