Thread: US commercial property foreclosure to continue increasing

US commercial property foreclosures expected to continue increasing
Monday, 06 April 2009

US commercial property defaults on the riseCommercial property loans in default or foreclosure in the US rose in the first quarter of this year as the recession cut occupancies and the credit crisis halted refinancing.

Delinquent loans climbed 43% in the first three months of this year to $65.9 billion, according to data from New York-based research firm Real Capital Analytics, an increase of $46 billion since the end of 2008.

A total of 3,678 US properties are now listed as in distress and commercial real estate values have fallen at least 30% since their 2007 peak and may decline another 11% this year, increasing the number of properties that may be repossessed, according to Deutsche Bank AG's real estate unit.

'We haven't yet seen the worst of the effects of the recession on the commercial markets,' said Stuart Saft, a partner at the law firm of Dewey & Leboeuf LLP in New York, who specializes in real estate.

Landlords who financed purchases with at least 60% debt are now dangerously close to zero equity, analysts claim.

There are numerous examples of once prime office property being sold at bargain prices. Foreclosures will continue to grow, probably for at least another year or so, according to Peter Culliney a Real Capital research director.

Boston's John Hancock Tower, the state's tallest skyscraper, was sold at auction at the end of March to Normandy Real Estate Partners and Five Mile Capital Partners for $661 million, about half of the purchase price of just three years ago. Broadway Partners paid $1.3 billion for the property in 2006 and defaulted on its loan.

The Nobu Hotel & Residences in lower Manhattan is among properties on Real Capital's troubled asset list. The planned 62 story tower, the Nobu sushi restaurant chain's first US hotel near the New York stock exchange, was being built by property investor Kent Swig but has been halted because of a dispute over loans.

Developer Sheldon Solow's planned East River housing and office development near the United Nations is also identified as delinquent on Real Capital's list. Solow is said to owe $85.7 million in construction loans and letters of credit on the project, according to Citigroup.

Real Capital defines distressed properties as those in which a lender has taken steps to foreclose or declare a borrower in default, as well as properties that have been returned to the bank, or in cases where landlords were given a loan extension or the debt was restructured.


http://www.propertywire.com/news/north- ... 62900.html

Commercial has been overbuilt, same as housing. With no income to support repayment (not finding tenants, tenants already there going out of business, and square-foot rental prices falling below profit levels) this is just a repeat--maybe more severe--of what happened in the late 1980s and early 1990s.

Gerald Celente has been predicting this since last year....guess it is finally happening. He says there will be "ghost malls".

Originally Posted by SicNTiredInSoCal

Gerald Celente has been predicting this since last year....guess it is finally happening. He says there will be "ghost malls".

Yeah where I live there already are street malls that are completely deserted.