Commercial Real Estate Developers To Paulson: Bail Us Out!

[babylonsister]

http://www.bizjournals.com/pittsburgh/stories/2008/12/22/daily2.html

Commercial real estate developers seek bailout
Pittsburgh Business Times - by Tucker Echols Washington Business Journal


The commercial real estate industry is the latest to seek a government bailout.

A dozen real estate development groups have asked Uncle Sam for help to avoid defaults, foreclosures and bankruptcies. The Wall Street Journal reports that some of the country’s biggest developers have asked Treasury Secretary Henry Paulson to be included in a $200 billion loan program recently created by the government to support the market for car loans, student loans and credit card debt.

In a letter to Paulson, the commercial real estate leaders warn that thousands of properties are in danger of foreclosure because current financing is coming due and credit for new financing is hard to come by. The report cites research from Foresight Analytics LCC that says $530 billion of commercial mortgages will be coming due for refinancing in the next three years.

Unlike residential mortgages, commercial mortgages are usually designed to last five to 10 years with balloon payments at the end of the term. A loan must be refinanced or repaid at the end of the term. If refinancing is unavailable, an owner would be faced with attempting a distress sale or losing the property.

Treasury officials have indicated a willingness to consider adding commercial real estate to the $200 billion loan initiative, but it could take time. The program is not even expected to be up and running, let alone modifiable, until February.

[patrice]

1. !!!!!!!!!!!!!!! So TIF-ing isn't enough to execute a functional business model???????

:grr: :grr: :grr: :grr: :nuke: :nuke:

[mrreowwr_kittty]

2. No shit. These assholes have been at the forefront of lavish subsidies for businesses.

Not to mention doing everything in their power to fight labor and wage protections and pushing stupid tax cuts when times were flush. They are a big part of the reason so many states are broke right now. :grr:

[patrice]

3. You should see some of the shit that they got built around here and then WALKED AWAY from in

a relatively short period of time. Great looking, brand new, commercial structures standing empty!! Now, what the hell kind of "business" is it that can AFFORD to make those kinds of mistakes???? Answer: Business, the risks for which are Socialized, and the profits for which are Privatized, a.k.a. SOCIALISM for Commercial Developers.

[Telly Savalas]

4. Wouldn't the bank benefit by adjusting the terms of the commercial mortgage?

Say a developer has a commercial mortgage that's reaching the end of its term and is facing a big balloon payment. If the bank that holds that mortgage simply extends the loan and lets the developer continue making the monthly payment its been making for a few more years and defers the balloon payment, it's still making just as much money on the deal. On the other hand, foreclosure saddles the bank with an undervalued illiquid asset, which is something they'd presumably want to avoid.

Is it the case that a lot of commercial mortgages are bundled into mortgage backed securities making it unclear who has the authority to alter the terms of the loan?