As banks and special servicers continue to take charge of distressed assets ($200 billion at the end of 2009 reported by Real Capital Analytics), they have three primary options to recapture at least some of the value:  Foreclose on the asset, complete a short sale or sell the non-performing note. The first two options can be both very time consuming and expensive or require the non performing borrower’s cooperation, neither which may be appealing or possible. As a result, we expect Note Sales will be an emerging trend in 2010 and into 2011. For states like Connecticut, New York and…

  With a paucity of new capital coming into the system and many loans maturing, most property owners have limited options. In some cases the value of the property has fallen below or near the loan balance. Most lenders appear to be opting to extend with modest pay downs. This explains why fewer borrowers are refinancing. The option with the least friction for borrowers is to ask for a loan extension. These extensions differ from securitized loans and non-securitized loans. Borrowers who have securitized loans maturing must deal with special servicers. When the loan is likely to go into default…

 The investment market held its collective breath late last week as the 10-year US Treasury touched 4% before settling at 3.79% on Friday. The sharp upward movement of the 10-year was a reminder of how important debt is to the overall economic recovery and our business in particular. Over the past twelve months, we’ve seen the continuation of a number of debt trends that are shaping the deals that close today: assumable debt that drives transactions; regional lenders filling a lending void for smaller (sub-$25MM) deals, and Fannie & Freddie drawing buyers to multi-family with attractive first mortgage financing. The…

  With next month’s U.S. Open back in nearby Bethpage, New York, it seems timely to consider how real estate, like golf, needs good support to create high performance over a career. Knowledgeable golfers understand the importance of Fanny Suneson, the caddie, who supported and guided Nick Faldo during his four major championships and who recently supported Henrik Stenson during his win at the Player’s Championship, golf’s “fifth major”. Additionally, “Freddie” Couples is known for his calm demeanor during stressful rounds and his clutch performances that have propelled him to captain of the American team during this fall’s Presidents Cup….

  Properties aren’t the only thing falling into distress these days. Private buyers, whose higher yield requirements left them on the sidelines during the 2004-08 run-up, see opportunity in distressed assets and are eager to purchase. Unlike the early 1990’s, however, when banks and the FDIC sold many single assets as well as bulk real estate portfolios, the abundance of distressed product has yet to surface. The current lack of “troubled” properties originally expected by potential buyers, is a function of several factors: significant foreclosures in many parts of the country have yet to occur, banks are more patient and…

  There appears to be an increasing air of optimism among real estate owners and investors with the recent increase in housing starts and apparent stabilization in the stock market. However, financing remains limited and expensive as spreads remain very wide and LTV’s very low. Unlike the early 1990’s, when banks and the FDIC dumped real estate assets, the banks today are exercising far more patience and appear willing to hold and manage foreclosed assets until pricing improves. Based on the proposed federal assistance that the feds plan to give to banks and the relaxation of mark-to-market accounting sales, we…

  Cash is increasingly becoming king. This is evidenced on several fronts: Major corporations are increasingly evaluating the sale and leaseback of corporate facilities to generate cash. Longer leases (15 years or more) and parent guarantees are becoming the norm. Lenders on commercial properties are requiring far more equity than in the past. Life companies are requiring 40% – 50% in equity and only lend on the highest quality real estate. Funds that can write the check for the entire acquisition price without the need for financing are the preferred buyer among sellers. The assuredness of closing typically wins out…

  As we approach the 2nd quarter of 2009, several trends are becoming apparent: Many institutional owners are under pressure to sell assets in order to redeem capital to their investors and, in some cases, to avoid violating loan covenants. Special servicers for CMBS commercial loans in default appear increasingly willing to provide time to negotiate terms. Many want a pay down in the debt balance – most start foreclosure proceedings at default. Strong regional and National banks are making more acquisitions and refinance loans, particularly for well capitalized owners. Their terms are often more competitive than life companies and…