When commercial real estate workout shops get nervous, I tend to hold my breath. The workout shops are the companies that buy commercial debt that is going belly up for pennies on the dollar from the banks and institutions and then play the bad guy.
They will be the ones that negotiate the rough terms for the borrower or foreclose outright on the properties. They are the guys who get max dollars on the properties no matter what the carnage is that occurs.
And they are getting nervous on the volume of deals in the commercial real estate market out there. When the vultures get scared, everyone one should pay attention…
As a workout shop, LNR either negotiates with borrowers to make a loan current or forecloses on the property to extract as much cash as possible from the delinquent mortgage. And while LNR used to make a nice profit working out the occasional bad loans, now the company and its competitors face a flood of bad debt.
“It’s tough going for everybody right now,” said Lisa Pendergast, managing director of CMBS strategy and risk at Jefferies & Co. and the incoming president of the Commercial Real Estate Finance Council. “I don’t think anybody built these [workout] shops to see these huge volumes of loans going bad.”
By LNR’s estimate, the front is widening with no relief yet visible on the horizon. via the Miami Herald
No related posts.
{ 3 comments… read them below or add one }
Yeah you have to wonder who is going to end up buying these firms out if they start going belly up. It sounds like a lot of unsecured debt that people just cant justify touching. Scary stuff.
Very well put. I am in the same boat as you. I start hearing grumblings of being nervous, I put myself on alert. I think many people are in the same boat!
The vultures are indeed a good warning mechanism. It's bizarre that people don't pay more attention to them.
Tod Maffin
http://www.SocialMediaMarketingForRealtors.com
{ 1 trackback }