The Perfect Storm: Deteriorating Rents and Occupancies, Deflating Sales Prices and Tight Credit

Government approved programs and bailouts are in place for many sectors of the battered economy, but where are the resources and solutions for property owners and investors in the heavily Distressed Commercial Real Estate Market?

Jan 31, 2010, 22:30 ET from Guardian Solutions

CLEARWATER, Fla., Jan. 31 /PRNewswire/ -- While much has been made of the aid the U.S. government has put into helping the economy, commercial property owners nationwide are beset with distressed properties. Help is available to commercial property owners, but it is not widely known about and commercial properties continue to get foreclosed unnecessarily.

"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," writes Victor Calanog, director of research at Reis, a New York-based real estate research organization. "With close to $3.5 trillion of loans outstanding and at least 12 to 24 more months of rent declines, I expect to see more commercial properties defaulting on loans."

Commercial real estate is expected to remain a drag on the U.S. economy through 2010 and beyond. However, some savvy commercial real estate investors that are unwilling to lose their holdings are taking a proactive approach to avoid foreclosure and protect their assets against further financial decline.

"We are seeing more commercial mortgages in distress every week. Corroborating our own findings, we recently received a report from the nation's largest real estate researcher, Trepp; they found that delinquent loans in commercial mortgage securities jumped 85 basis points to 5.65 percent, and that figure is up from 4.8 percent a month earlier. 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," said Ira J. Friedman, COO of Guardian Solutions, a commercial loan restructuring firm based in Florida.

The Urban Land Institute, a research center, said in an emerging trends report this month with consultant PricewaterhouseCoopers that respondents to its 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 and projects value declines of 40 percent to 50 percent off 2007 market peaks."

"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; the longer they wait to take action, the more precarious their situation becomes…," added Friedman.

As more commercial real estate property owners see tenants go bankrupt, downsize or invoke escape clauses, they continue to feel the serious effects of the economy. The national vacancy rate is expected to reach 19 percent by the end of 2010, the highest recorded since 1986. Without paying tenets, commercial property owners have little cash flow to make impending balloon loan payments and may face foreclosure.

Commercial property owners who are trying to keep their properties viable are seeking help from firms like Guardian Solutions that specialize exclusively in commercial loan modification. Currently, there are a handful of specialized firms that hire highly qualified employees, such as accountants, MBAs, real estate professionals and attorneys to deal specifically with the complexities involved in a commercial loan restructuring plan.

Unlike residential loan modification, commercial real estate mortgage modifications are not based on cookie cutter recipes that can be easily followed.  Each modification is completely unique as is each business attached to their respective commercial mortgage. These modifications are quite labor intensive, but using experienced people in various disciplines makes for a smoother process.

A major challenge facing commercial loan modifications firms is that they have to please all parties involved to a certain degree. The property owner needs new terms or concessions so that he can continue doing business, but the lender or bank also needs assurances that extending new terms or giving concessions will yield results for the business so that they do not end up owning a property that is greatly devalued with a bankrupted business.

"Using an independent loan restructuring firm that is appropriately staffed with skilled and proactive professionals is what commercial property owners in distress need right now," said Jeramie P. Concklin, CEO of Guardian Solutions. "A focused commercial loan restructuring company can ease the entire process by doing all the work—the due diligence, business plan and negotiations for the property owner."

Concklin added, "Once fully prepared with every piece of relevant information and a realistic business plan, Guardian Solutions' staff enters into negotiations with the lender to secure the best possible terms for the client, while addressing the concerns of the lending institutions.  It is important to understand that what we are dealing with here is an overwhelmed banking system. Our firm excels at providing the lenders the specific information they need in order to make a timely, realistic decision."

About Guardian Solutions

Guardian Solutions is the one of nation's largest commercial loan restructuring companies and is committed to helping commercial property owners save their properties. The company's knowledgeable mediators are experienced in a variety of disciplines to provide customized restructuring solutions. For more information, visit www.GuardianSolutions.org

Contact:

Jamie Sene

Vice President, Marketing

Guardian Solutions

727-442-8833

jvs@guardiansolutions.org

www.GuardianSolutions.org


SOURCE Guardian Solutions



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