Loan modifications/forebearance in commercial real estate?

[Reform2009]

A lot of talk about our crisis in massive residential foreclosures and loan modifications banks are planning on doing. Does anyone know if it is the same on the commercial scene as well? Strip centers, office complexes, apartment complexes, development projects, hotels, resorts, etc. are the examples I am talking about. I have seen so many half empty strip centers and a large amount of board ups.

A lot of my friends who own commercial real estate are extremely concerned because their loan matures shortly and the banks are not lending. If the current lender does not want to give an extension, do they have a right to foreclose and will the owner lose their equity? Scary situation. I know of a friend who had a loan that was due last year with GE and has an empty outlot. He cannot get a lender to refinance and GE is foreclosing on him. He also has a personal guarantee.

[Studebaker_Hawk]

A lot of talk about our crisis in massive residential foreclosures and loan modifications banks are planning on doing. Does anyone know if it is the same on the commercial scene as well? Strip centers, office complexes, apartment complexes, development projects, hotels, resorts, etc. are the examples I am talking about. I have seen so many half empty strip centers and a large amount of board ups.

A lot of my friends who own commercial real estate are extremely concerned because their loan matures shortly and the banks are not lending. If the current lender does not want to give an extension, do they have a right to foreclose and will the owner lose their equity? Scary situation. I know of a friend who had a loan that was due last year with GE and has an empty outlot. He cannot get a lender to refinance and GE is foreclosing on him. He also has a personal guarantee.

A lot of them are going into foreclosure now. And yes if they do not get an extension and can not pay off their obligations they will go into foreclosure.

[Reform2009]

A lot of them are going into foreclosure now. And yes if they do not get an extension and can not pay off their obligations they will go into foreclosure.

Would bankruptcy protection protect a commercial property owner from foreclosure due to the credit freeze? Banks are not willing to lend out 10 plus million dollar loans and what is the property owner to do if their balloon comes up for renewal and there are no lenders out there?

[ChrisSpencer]

A lot of talk about our crisis in massive residential foreclosures and loan modifications banks are planning on doing. Does anyone know if it is the same on the commercial scene as well? Strip centers, office complexes, apartment complexes, development projects, hotels, resorts, etc. are the examples I am talking about. I have seen so many half empty strip centers and a large amount of board ups.

A lot of my friends who own commercial real estate are extremely concerned because their loan matures shortly and the banks are not lending. If the current lender does not want to give an extension, do they have a right to foreclose and will the owner lose their equity? Scary situation. I know of a friend who had a loan that was due last year with GE and has an empty outlot. He cannot get a lender to refinance and GE is foreclosing on him. He also has a personal guarantee.

I have many friends who work in commercial property acquisition and from what I've heard from them, and from economic forecasters, is that commercial real estate has been about a year delayed from residential, and that the rates of foreclosures in commercial properties are increasing. However, the dip in commercial real estate will not be anywhere near as dramatic as the dip in residential because unlike residential, commercial properties are not frequently bought and flipped and resold in a speculative frenzy because their purchase is for operating functionality of a business and therefore more long-term in nature in the first place.

[ChrisSpencer]

Would bankruptcy protection protect a commercial property owner from foreclosure due to the credit freeze? Banks are not willing to lend out 10 plus million dollar loans and what is the property owner to do if their balloon comes up for renewal and there are no lenders out there?

It's not nearly as hard to get loans for commercial properties as it is for residential loans right now. I just got a $1.6 million 20 year fixed rate at 5.8% last week with only $200,000 down. Try asking for the same terms in a residential jumbo mortgage and I'm sure you'd be laughed at for even bothering.

There are still lenders out there for commercial loans. When a firm can't afford the mortgage anymore it declares ch 11, assets go into a sort of trusteeship for future repayment of debt, and and the firm tries to see what it can do to remain solvent. If it still can't stay afloat then it goes into Ch 7 and sells everything, property gets foreclosed upon or seized by whatever debt holders remain, and the company vanishes.

So you can say that bankruptcy protection already exists for commercial properties.

[Reform2009]

It's not nearly as hard to get loans for commercial properties as it is for residential loans right now. I just got a $1.6 million 20 year fixed rate at 5.8% last week with only $200,000 down. Try asking for the same terms in a residential jumbo mortgage and I'm sure you'd be laughed at for even bothering.

There are still lenders out there for commercial loans. When a firm can't afford the mortgage anymore it declares ch 11, assets go into a sort of trusteeship for future repayment of debt, and and the firm tries to see what it can do to remain solvent. If it still can't stay afloat then it goes into Ch 7 and sells everything, property gets foreclosed upon or seized by whatever debt holders remain, and the company vanishes.

So you can say that bankruptcy protection already exists for commercial properties.

I do realize that banks are lending smaller loans between $5 million and less. The smallest loan I have is $10 million and nobody I know of wants to touch a loan of that size or larger. Never ever had any problems getting a bridge loan until last year. Again, there is not a bank out there now that wants to be in a second position behind a loan which is $10 million and greater. Never in my wildest fantasies have I thought that the credit markets would shut down. If I knew of the possibilities of this happening, I would have restructured my mortgage where once the loan matures, that I have an automatic extension with a variable fluctuating rate based on Libor or Prime where the bank does not get stuck on a fixed rate. Anyone know of any lenders out there writing loans on multi family complexes?

[ChrisSpencer]

I do realize that banks are lending smaller loans between $5 million and less. The smallest loan I have is $10 million and nobody I know of wants to touch a loan of that size or larger. Never ever had any problems getting a bridge loan until last year. Again, there is not a bank out there now that wants to be in a second position behind a loan which is $10 million and greater. Never in my wildest fantasies have I thought that the credit markets would shut down. If I knew of the possibilities of this happening, I would have restructured my mortgage where once the loan matures, that I have an automatic extension with a variable fluctuating rate based on Libor or Prime where the bank does not get stuck on a fixed rate. Anyone know of any lenders out there writing loans on multi family complexes?

Reagants, Premier Bank, just to name two.

[Reform2009]

Reagants, Premier Bank, just to name two.

Thank you for the contact information. Where are those two banks based out of if you do not mind me asking?

[ChrisSpencer]

Thank you for the contact information. Where are those two banks based out of if you do not mind me asking?

From my knowledge they're southern banks. I was looking into both of those banks recently. I'm in Tallahassee so that's about the best I can give you really at this point.