Politically important insights into commercial real estate outlook for the next 2 years. Commercial Real Estate already experiencing radical recovery even as economy goes slower than predicted.
Download the presentation here: dennis_yeskey_nycrew_2011 (2).pptx
Many bubbles already occurring — especially in apartments as investors pour in to numerous CRE projects including hospitality and retail.
Last Two Years Have Been Very Unusual/Strange – Have Not Evolved as Predicted. Minimal Distressed Selling/Workouts/Bankruptcy.
- Economy suffers through “Great Recession.”
- CRE also suffers massive declines in values, fundamentals, and, most importantly, significant cash flow and refinancing issues.
- Unlike previous CRE downturns, borrowers have been able to keep properties due to lenders’ unique actions – “Amend & Extend.”
- Significant CRE equity readily available but demanding discounts. Buyers frustrated. Sellers not pressured. Banks minimize chargeoffs.
- In 3rd – 4th Quarter 2010, some signs emerge that CRE restructuring stalemate is breaking up – increasing loan resolutions.
As Economy Recovers, “Real” CRE Workouts Increase as Healthy Lenders Take More Aggressive Actions and Buyers Seek New M&A Opportunities
- General consensus is economy is not double-dipping, just requiring longer, slower, bumpier jobless recovery.
- CRE values increase as capital markets overtake product fundamentals – “bid/ask” spread narrows, creating numerous buying opportunities.
- Less prevalent bank extensions, especially for healthier banks, shift bank actions more towards foreclosure/sale of distressed debt.
- Possible ugliest sector – CMBS – results in legal actions and litigation.
- “Real” borrower workouts increase as economy/banking improves and CRE equity continues to increase.