Multifamily Auction Sales

Solvent Banks May Make New Loans Later This Year

Commercial Loan Modifications

Retail Foreclosures Are Low

Lease Restructuring

New Graduates!

                                                                                                                      Mike Moloney, President



Multifamily Auction Sales:

The sale of San Tropez in Scottsdale, Arizona sold in August 2009 still stands as an excellent example of property value in the sale of an asset owned by a distressed owner. The 20 year old 316 unit luxury property sold for $91,772/ unit. It was 93% occupied and in very good condition when sold. There were 44 bidders. The winning bidder was a private capital group based in Santa Barbara, CA, Nevins Adams Lewbel Schell.

By this time next week, we will have two more apartment deals to report, both of which are non-performing “paper” sales being conducted this week (Note and Deed of Trust). They are blue collar, and not luxury complexes, in Metro Phoenix. We expect the prices to be less than $40,000 per unit, perhaps as low as $20,000.

Solvent Banks May Make New Loans Later This Year:

The surge in residential short sales is making most of the FDIC seized banks solvent. To start with, the “new” bank bought the “bad bank” at a discount, and usually bought only the “good” (performing) assets. But, in addition, now the feds are rewarding the new banks for doing short sales. Those profits may find their way back into the lending arm of the bank. Those banks may be lending to CRE soon, which has historically been one of the main businesses for local commercial banks. Build those relationships with the “new” banks in your community now. To see why (and to see who really is making money off the taxpayers), go to: Video Marketing and Mortgage News Designed for Mortgage and Real Estate Sales To see what the FDIC is left with go to: FDIC: Asset Sales The FDIC appears to prefer to sell the paper at a discount rather than to actually foreclosure themselves.

Commercial Loan Modifications:

Commercial loan modifications are happening. (They are often called recasting or restructuring.) Don’t be surprised to see close-to-normal Debt Service Coverage Ratios (1.4 to 1.6) and Loan to Value of 50 to 65% on extensions by existing lenders. The owner must have a well crafted business plan to turn the property around, or to maintain its cash flow. In some cases if the cash flow cannot service the debt, and the lender will want the owner to deposit up to 2 years of loan payments in an escrow. In most cases the owner will have to pay down the loan and pledge additional collateral. Otherwise many commercial banks will proceed with foreclosure. Many of these same requirements are reflected in new commercial loans that are being made, as well.

Retail Foreclosures Are Low:

Driving down the street you can see empty stores. However, in reality, nationwide, only 2% of retail properties are actually in default or foreclosure. In most cases, loan modifications are being negotiated.

Lease Restructuring:

Generally if an existing tenant has been paying rent on time for more than 2 years, most lenders want those leases extended at least through 2014, in order to get a loan extension. It is reported that in some of those cases, if the owner is persuasive about the quality of the income stream from the tenant, the lenders may not require new financials from the tenants. YOU can make commissions by re-negotiating the extension of those leases you placed a few years ago.

Two Graduates This Week:

Two Candidates for Certified Commercial Sales Specialists (CCSS) completed their CCSS course work this week: Mike Watkins, and Adela Lujan. Congratulations to both of you! Welcome to the Commercial Real Estate Institute, as a full member.
 

More next Friday, Feb.19.