[timmac]

What ever happen to the supposed commercial real estate that was to colapse and cause a 2nd wave of bank failures, is it still going to happen or has this been fixed, we still have a lot of vacant commercial here in Vegas but seems to be not a problem like the resident real estate bubble, did all the bailouts keep this at bay, anyone know whats going on here.

[Tyler_JC]

It's happening, albeit slowly.



Over the next couple years as these loans come due many of them will blow up and take down some banks.

Implications of John Hancock Tower Auction Grim for Commercial Real Estate

$this->bbcode_second_pass_quote('', 'S')uppose you bought an office building five years ago with 20% down, for an 80% loan-to-value ratio. You have not missed a payment, the building’s value has been stable, your amortization has paid down the loan balance by four percent of the building’s original value. A new loan will have a 76% loan-to-value ratio.

Here’s the problem: nobody will make a commercial mortgage loan with a 76% loan-to-value ratio today. You haven’t missed a mortgage payment, your building is fully leased, you’ve been working down your principal, but the lenders are all scared. Bank regulators are scared. Secondary markets are scared. So you have to pony up additional cash to bring the loan-to-value ratio down to at least 70%, and maybe even 65 or 60%.

What if you don’t have the cash sitting around to do that? You have a maturity default. Your problem is that credit standards tightened faster than you were paying off your loan.

[Leanan]

The numbers are ugly and getting uglier, but I don't think you can expect a fast crash like we got with residential mortgages. Banks are willing to cut deals for commercial borrowers that ordinary people would never get.

[timmac]

$this->bbcode_second_pass_quote('Leanan', 'T')he numbers are ugly and getting uglier, but I don't think you can expect a fast crash like we got with residential mortgages. Banks are willing to cut deals for commercial borrowers that ordinary people would never get.

[pedalling_faster]

it's happening, although some of the buys CRE companies made were so STUPID, losing those buildings hardly seems like a collapse (e.g. Morgan Stanley's purchase of a huge amount of office space in San Francisco in 2007 ).

my brother worked for Morgan Stanley CRE for about 15 years. worked his way to be a mid-level Vice President. CRE was his life.

until they let him go - this last month.

[Armageddon]

I am seeing more and more vacancies in strip malls everyday. These small businesses just aren't going to make it much longer. I have a feeling many are barely hanging on.

[Tyler_JC]

CRE loans were typically made with much larger down payments than home mortgages.

No one was getting a no money down loan for an office park.

You need 20%+ to get a CRE loan. That's why we haven't seen the kinds of defaults and writedowns yet. There is still enough of an equity cushion that when a bank repossess a bankrupt office park, it can resell it for close to the remaining terms of the mortgage.

The same cannot be said for the "liar loans" that made the subprime mortgage crisis so bad.



There's also the problem of concentration. The Big Banks don't own as large a share of the commercial real estate market as the local/regional banks.

[pedalling_faster]

$this->bbcode_second_pass_quote('Armageddon', 'I') am seeing more and more vacancies in strip malls everyday. These small businesses just aren't going to make it much longer. I have a feeling many are barely hanging on.

[Tyler_JC]

$this->bbcode_second_pass_quote('pedalling_faster', '
')
One of the implications of Peak Oil is that energy costs rice and make many activities that were previously profitable, un-profitable, so they cease - and the economic activity is not immediately replaced.

and crime rises accordingly.

[Armageddon]

$this->bbcode_second_pass_quote('Tyler_JC', '')$this->bbcode_second_pass_quote('pedalling_faster', '
')
One of the implications of Peak Oil is that energy costs rice and make many activities that were previously profitable, un-profitable, so they cease - and the economic activity is not immediately replaced.

and crime rises accordingly.

[Ludi]

It seems to be finally happening here in TX, near San Antonio, where there's a 100 acre or so tract just outside the city which was scraped for commercial development and has been returned to grazing cattle. The cattle are being given hay because all the topsoil was scraped off the tract. There are several of these large scraped tracts which I expect will not be built on.

[Ludi]

$this->bbcode_second_pass_quote('pedalling_faster', '
')One of the implications of Peak Oil is that energy costs rice and make many activities that were previously profitable, un-profitable, so they cease - and the economic activity is not immediately replaced.

and crime rises accordingly.

[IslandCrow]

$this->bbcode_second_pass_quote('Ludi', ' ') The cattle are being given hay because all the topsoil was scraped off the tract.

[seahorse2]

Almost $2 trillion in commercial loans have to be rolled over in the next 32 months. The problem? The property securing the loans is worth less than the loan, so, typically, the debtor has to put more money or collateral down to secure the loan. That's a real problem for struggling businesses. In fact, it means that a lot of these loans can't be rolled over under the old methods. These loans are so big that banks are bending over backwards not to foreclose, just as they waited to foreclose on many residential developments. If the banks have to foreclose and take the bad assets back, it could easily put many more of these banks into closure. Thus, the FDIC and other over-seeing agencies are allowing the banks a lot of room as to how they value these loans and properties.

[rangerone314]

$this->bbcode_second_pass_quote('pedalling_faster', '')$this->bbcode_second_pass_quote('Armageddon', 'I') am seeing more and more vacancies in strip malls everyday. These small businesses just aren't going to make it much longer. I have a feeling many are barely hanging on.

[shortonsense]

$this->bbcode_second_pass_quote('seahorse2', 'A')lmost $2 trillion in commercial loans have to be rolled over in the next 32 months. The problem? The property securing the loans is worth less than the loan, so, typically, the debtor has to put more money or collateral down to secure the loan. That's a real problem for struggling businesses. In fact, it means that a lot of these loans can't be rolled over under the old methods. These loans are so big that banks are bending over backwards not to foreclose, just as they waited to foreclose on many residential developments. If the banks have to foreclose and take the bad assets back, it could easily put many more of these banks into closure. Thus, the FDIC and other over-seeing agencies are allowing the banks a lot of room as to how they value these loans and properties.

[pedalling_faster]

$this->bbcode_second_pass_quote('Armageddon', 'D')o they use the same formula with crime as they do with inflation and unemployment ?

[Ludi]

$this->bbcode_second_pass_quote('IslandCrow', '')$this->bbcode_second_pass_quote('Ludi', ' ') The cattle are being given hay because all the topsoil was scraped off the tract.

[seahorse2]

This regarding a client today. My client is a retail business. My client rents commercial space in a very prominent commercial retail outlet. A little more than a year ago, they were over $100k late in rent payments and the landlord was going to evict them. Well, since that time, landlord went bankrupt. My client now owes $300k in back rent. After the bank foreclosed and took over the retail outlet (a $30 million dollar loan), they forgave the $300k back rent owed by my client and reduced their rent payments. Why? I'm convinced they are trying to keep tenants in their and paying so that they can find a buyer. However, this shows how bad the commercial property market is when tenants are forgiven $300k in back rent and rent reduced just to keep the space filled.

[shortonsense]

$this->bbcode_second_pass_quote('seahorse2', ' ') I'm convinced they are trying to keep tenants in their and paying so that they can find a buyer. However, this shows how bad the commercial property market is when tenants are forgiven $300k in back rent and rent reduced just to keep the space filled.