Conventional wisdom in real estate circles says the commercial real estate market lags the residential real estate market slightly. If this is true, our Ontario commercial real estate loan modification attorneys are afraid there's a long way to go before the real estate market recovers. In fact, Dow Jones Newswires reported March 10 that there may be a trend toward commercial landlords walking away from their properties, echoing a similar trend in the residential real estate market. As with residential borrowers, these commercial borrowers tend to walk away when they are deep underwater and strapped for income.
Unlike residential mortgages, commercial mortgages come due every few years, when they must be refinanced. That means commercial borrowers have to demonstrate their financial health more often than their residential counterparts. Unfortunately, the commercial real estate market has been hit hard by the bad economy, particularly here in California. Not only are buildings losing their value, but business tenants are scarce and holding on to them may require concessions like rent breaks. In this context, the article said, more CRE companies are analyzing whether it makes financial sense to hold on to buildings that are deep underwater. Several major CRE investors have already walked away, including two companies who saw the value of the Stuyvesant Town/Peter Cooper Village housing complex in Manhattan go from its $5.4 million purchase price to less than $2 million today. This month, Vornado Realty Trust announced that it would default on $235 million in loans.
The article notes that CRE companies typically try to negotiate a loan workout before walking away, but may be stymied if the loan was securitized. As Long Beach commercial real estate loan modification lawyers, we hope this succeeds whenever the numbers work. Commercial real estate foreclosures may actually be worse for the economy than residential foreclosures. Because commercial loans are much larger, banks have more invested in their success -- and can be hurt more seriously by their failure. As the Congressional Oversight Panel for the bailout warned recently, this could cause failures of entire small banks with heavy real estate investments. That would certainly depress the CRE market, but is also likely to be felt across the economy, as banks fail, buildings sit empty and access to credit is reduced.
At Howard Law PC, we have handled residential loan modifications throughout the housing crisis. Now, we are using that experience to help CRE companies negotiate their own loan modifications. As with residential loans, commercial loan modifications may be an uphill battle for borrowers because lenders see more profit in denying or endlessly delaying action. Our Laguna Beach commercial loan modification attorneys can get their attention more quickly than many clients could on their own, in part because lenders understand that when an attorney is involved, a lawsuit may follow. In fact, we prefer to settle a loan workout through negotiations, but we absolutely will sue when our clients' rights have been violated.
Howard Law offers free, confidential consultations to all potential clients, so you can speak to us with no further obligation. To set up a meeting, please call us at 1-800-872-5925 or contact us through this site.