Residential Downturns Effect on Commercial

NEW -> Contingent Buyer Assistance Program
To kind of get back to capocorso's original topic, just what are commercial prices doing? We were looking to relocate to south OC and wanted to purchase a vacant lot to build on but got tons of different scenarios and Dad got discouraged. So if some one who can simplify it for me, a vacant undeveloped lot in OC costs what per sqft.? The company ownes the land we are on now but it is just too far away from our customer base in OC/LA I am just trying to gather info to bring it up to pops again I hate my commute!
 
<em>what is a feeder fund? is that like a fund of funds?





</em>http://www.investopedia.com/terms/f/feederfund.asp
 
I saw a scary sight driving home from work in Miami. It was a biiiggg yellow

billboard.



It said commercial warehouse auction, and had a phone number. I had not thought

that Miami had an excess of commercial property. Due to zoning, coml is usually hard to come by. But that looks like something that would sell in even a medium bad

market can't be sold in our mkt.
 
[quote author="graphrix" date=1243610253]Bumping this one to ask... How is commercial RE doing now a days?</blockquote>
Sucking wind and getting worse by the day. One in every 3 commercial loans that I've reviewed had to be downgraded and a those of those downgrades are on the fast track to getting NODs.
 
[quote author="graphrix" date=1243610253]Bumping this one to ask... How is commercial RE doing now a days?</blockquote>


I attended a BIA workshop on troubled assets. The regional asset managers for B of A and GMAC addressed the group.



The B of A guy said they are overwhelmed with properties. His staff went from 4 to 17 in the last year, and they hire outside consultants to do all their work, so each of these employees is overseeing dozens of projects. He also said the pipeline is growing as commercial defaults are picking up significantly.



The GMAC guy said something astounding, "Our performing book is non-existent." Every loan they still own is in default! Every one of them. Of course, he did look at the bright side when he noted, "Our pipeline of REO is not growing." Yes, because they already own everything in their portfolio.



Another point was noted among the group; there is no commercial lending at all right now. None. Every transaction in the marketplace is occurring with equity. It is the extreme example of "cash is king."



Both lenders stated that small and mid-sized regional banks are going to be wiped out this year, and the FDIC will be very busy cleaning up the mess. There are thousands of properties held by smaller banks that are completely non-performing. Some have been foreclosed and some have not, but none of these properties are selling as REO because the moment they recognize the loss, these lenders are declared insolvent, and the FDIC will take them over. Thousands of small banks are in this circumstance. This is why there have not been more commercial RE foreclosures and property sales.



We are still in the early stages of the commercial property bust. Expect to see thousands of bank failures over the next 18 months.
 
[quote author="graphrix" date=1243610253]Bumping this one to ask... How is commercial RE doing now a days?</blockquote>


Cap rates up about 250 to 350 basis points in the multi family sector. And that is combined with rent declines of 10% to 20% and more realistic underwriting by buyers. I would guess values down by 30% to 40%.



And that is just multifamily, which is the best performing commercial RE sector due to financing being available from Fannie and Freddie. If you are looking at office, industrial, retail, hotel, etc, it's worse.
 
[quote author="IrvineRenter" date=1243639572][quote author="graphrix" date=1243610253]Bumping this one to ask... How is commercial RE doing now a days?</blockquote>


I attended a BIA workshop on troubled assets. The regional asset managers for B of A and GMAC addressed the group.



The B of A guy said they are overwhelmed with properties. His staff went from 4 to 17 in the last year, and they hire outside consultants to do all their work, so each of these employees is overseeing dozens of projects. He also said the pipeline is growing as commercial defaults are picking up significantly.



The GMAC guy said something astounding, "Our performing book is non-existent." Every loan they still own is in default! Every one of them. Of course, he did look at the bright side when he noted, "Our pipeline of REO is not growing." Yes, because they already own everything in their portfolio.



Another point was noted among the group; there is no commercial lending at all right now. None. Every transaction in the marketplace is occurring with equity. It is the extreme example of "cash is king."



Both lenders stated that small and mid-sized regional banks are going to be wiped out this year, and the FDIC will be very busy cleaning up the mess. There are thousands of properties held by smaller banks that are completely non-performing. Some have been foreclosed and some have not, but none of these properties are selling as REO because the moment they recognize the loss, these lenders are declared insolvent, and the FDIC will take them over. Thousands of small banks are in this circumstance. This is why there have not been more commercial RE foreclosures and property sales.



We are still in the early stages of the commercial property bust. Expect to see thousands of bank failures over the next 18 months.</blockquote>
I would be one of those consultants that the BofA guy is talking about. That is exactly what my fellow consultants and I are doing at a large regional bank up...going through the bank's commercial real estate portfolio and risk rating it with recommendations as to the next step. The loans out here are smaller...$1MM to $10MM so you are dealing with relatively weak borrowers who are for the most part overleveraged. At least 10% of the loans we review are heading towards REO. The best performance property type is mobile home parks followed by LA apartments. The worst performers are office, retail, and apartments outside of the greater LA area.
 
[quote author="IrvineRenter" date=1243639572][quote author="graphrix" date=1243610253]Bumping this one to ask... How is commercial RE doing now a days?</blockquote>


I attended a BIA workshop on troubled assets. The regional asset managers for B of A and GMAC addressed the group.



The B of A guy said they are overwhelmed with properties. His staff went from 4 to 17 in the last year, and they hire outside consultants to do all their work, so each of these employees is overseeing dozens of projects. He also said the pipeline is growing as commercial defaults are picking up significantly.



The GMAC guy said something astounding, "Our performing book is non-existent." Every loan they still own is in default! Every one of them. Of course, he did look at the bright side when he noted, "Our pipeline of REO is not growing." Yes, because they already own everything in their portfolio.



Another point was noted among the group; there is no commercial lending at all right now. None. Every transaction in the marketplace is occurring with equity. It is the extreme example of "cash is king."



Both lenders stated that small and mid-sized regional banks are going to be wiped out this year, and the FDIC will be very busy cleaning up the mess. There are thousands of properties held by smaller banks that are completely non-performing. Some have been foreclosed and some have not, but none of these properties are selling as REO because the moment they recognize the loss, these lenders are declared insolvent, and the FDIC will take them over. Thousands of small banks are in this circumstance. This is why there have not been more commercial RE foreclosures and property sales.



We are still in the early stages of the commercial property bust. Expect to see thousands of bank failures over the next 18 months.</blockquote>


GMAC/Capmark's program was to sell off all of their commercial loans as CMBS. The ones they got stuck with on their balance sheet were the ones they couldn't sell for whatever reason.......overly aggressive underwriting, caught when the market popped, etc. That is why all of the stuff on their balance sheet has gone bad.
 
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