Portland Business Journal by Rance Gregory, Morrison Street Capital
Date: Tuesday, September 4, 2012, 10:57am PDT - Last Modified: Tuesday, September 4, 2012Yes, we've all been reading about colossal 1 ton shoes that will fall on the commercial real estate market. And yet it hasn't happened the way we've been expecting it. Rance Gregory explains why.
Summary and Key Quote.
Commercial real estate simply does not mark-to-market as quickly as do stocks and bonds, no matter how many derivatives the industry puts in place to make bets on the direction of the market or how badly some wish it would be so. In reality, commercial real estate has been a slow-motion train wreck for the past five years. There has been real damage and pain, but it has occurred largely out of view, in loan workouts, consensual foreclosures and complex recapitalizations, resulting in paper writedowns and real losses.
Why then hasn’t the crash been loud and sudden? Why do many have the feeling the industry is recovering or has recovered? It seems many industry veterans were expecting to fight the last war, remembering a saving and loan collapse and a consolidated government-sponsored (RTC) fire sale of troubled assets. Instead, the actual mechanisms involved provided banks with additional capital (TARP), or worked on healing the background credit markets (CMBS) through programs such as TALF, PPIP, etc, in the hopes of stabilizing the system and providing time for the industry to work through its problems in a more organized way.
The answer is that it wasn’t one giant shoe, rather many thousands of smaller shoes, dropping one loan at a time, scattering across a diverse commercial real estate landscape, leaving behind alternating spots of utter destruction and patches of renewal.You can read the full article at In commercial real estate, the other shoe(s) are falling
A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga
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