Commercial Loan Modification May Thwart New Reports

Help is available to commercial property owners with distressed properties facing foreclosure. Some savvy commercial real estate owners are taking a proactive approach to avoid foreclosure and protecting their assets against further financial decline by seeking commercial loan modifications through commercial loan restructuring firms.

“Not since the early 1990s have we observed this perfect storm of deteriorating rents and occupancies, deflating sales prices, and tight credit that’s leading to a lot of defaults,” says Victor Calanog, director of research at Reis, a New York-based real estate research organization. With close to $3.5 trillion of loans outstanding, Calanog expects to see more commercial properties defaulting on loans. And, real estate experts expect commercial real estate to remain a drag on the U.S. economy through 2010 and beyond.

A report from the nation’s largest real estate researcher, Trepp, says that delinquent loans in commercial mortgage securities jumped 85 basis points to 5.65 percent last month--up from 4.8 percent a month earlier. And, an emerging trends report from The Urban Land Institute, a research center, and consultant PricewaterhouseCoopers says that respondents to their survey predicted that commercial real estate vacancies will continue to increase and rents will decrease across all property sectors before the market hits bottom in 2010. Respondents also project value declines of 40 percent to 50 percent off 2007 market peaks.

“Based on my experience, the worst thing that a property owner can do now is to ignore his situation and hope that things get better,” says Ira J. Friedman, chief operating officer of Fla.-based commercial loan restructuring firm Guardian Solutions. “Commercial property owners need to know that they can take steps to improve their situation and seek help and guidance while the situation is still salvageable,” he adds.