Lack of growth often leads to deflation. We experienced a similar trend – yet for different reasons – 80 years ago. The stock market initially crashed in 1929, but 1930-1932 was a time of a turbulent stock market that managed to stay afloat. It wasn’t until late 1932-1938 that deflation set in and the stock market set new lows. Could we be experiencing something similar right now? The banking sector is signaling a strong response to that question. And the answer is yes.
Continue reading “Banks Continue To Fail At A Record Pace” »
Breakwater Equity Partners, Commercial Loan Modification, Commercial Loan Workouts, Failing Banks, Troubled Commercial Properties
A tenant in common, or TIC, offers investors the ability to acquire a percentage of ownership in a real estate property. When the market was strong, particularly in the past few years, many “baby boomers” (and others) repositioned their portfolios, seeking investments that would not require so much time and attention. The TICs appeared to be safe investments that would generate a predictable return on their investments.
Problems arose as the market cooled. Some areas saw an increase in vacancies and a decrease in rents. The restricted cash flow has meant that some investors find the income is not sufficient to make their mortgage payments.
Continue reading “Problems arising with TIC Investments in Commercial Real Estate” »
Commercial Loan Modification, TIC Investment, Troubled Commercial Properties
Commercial mortgage-backed securities (CMBS) capitalize on the non-residential real estate market. In light of an uncertain economic environment, the default rate on these mortgages has led to a sharp rise in CMBS defaults. The Internal Revenue Service (IRS) has since introduced a way of easing the investor pain associated with defaults by actually offering an attractive option: instrument modification.
Known by the IRS as Revenue Procedure 2009-45, this ruling enables loan servicers to choose securitized loan restructure and modification prior to the fiscal instruments’ actually arriving at a default state. Best of all, there are no tax penalties associated with the process. This empowerment places servicers on par with so-called balance-sheet lenders – like pension funds and regional banks — which have all along made frequent use of the practice to navigate through the credit crunch relatively unscathed.
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CMBS Loans, Commercial Loan Modification
For those who are considering a new commercial real estate loan, it is important to know that commercial-backed securities (CMBS) are experiencing historically high delinquency rates. Not only will this affect future interest rates, it may mean that banks and other financial institutions will be tightening their belt and approving fewer loans regardless of the borrower’s past history or ability to repay the loan.
The overall delinquency rate has climbed from a relatively normal 2.77% last year to the historical high of 8.42% in May, 2010. For, seriously delinquent loans (this figure eliminates anything under 60 days past due) the current figure is 7.55% while last year’s rate was 2.18%. Fitch Ratings forecasts that this trend will continue through the end of 2010 and will exceed 11% by the end of December. Continue reading “CMBS Delinquencies Reach Historic High” »
CMBS Loans, Commercial Loan Modification, Commercial Real Estate Loan Workout
While Breakwater Equity currently has many TIC loan workouts in house, client Met Center 10, in particular, received national media attention when The Wall Street Journal published an article about an arbitration ruling against Grubb & Ellis alleging fraud and gross negligence. The project is an office building purchased for tenant-in-common (TIC) investors and run by NNN Realty Advisors, Inc, before they merged with Grubb in 2007. Below is an excerpt from the article by WSJ reporter Anton Troianovski.