Randy Getz says the commercial real estate market isn’t as bad as the headlines may portray it. Yes, there has been a general loss in value of 15 to 40 percent in the last few years. And yes, banks are calling in loans because in that loss of value, the loan-to-value ratio has gotten out of whack. To get back into the sweet spot of about 60 percent, owners need to pay the loans down; reinvest in buildings that are not longer worth what they once were.
Sound like the residential mortgage meltdown? According to Randy, an Executive Vice President of CB Richard Elllis, he just doesn’t see that wholesale run toward repossession, and huge asset sales at discounted values. What he DOES see is a lot of investors waiting for a big wave of distressed buying opportunities.
If Randy is right, the big wave may not happen. Although commercial real estate owners with commercial mortgage backed securities (CMBS) may find it hard to find someone to talk to about their loan, in general the banks and lenders are moving more rapidly than in the early days of the residential mortgage crisis to deal with these loans. More tomorrow on how the government is getting involved.