Commercial Foreclosures Are Coming
30. Nov, 2009 
5 Comments
Just read the testimony Jon D. Greenlee, Associate Director, Division of Banking Supervision and Regulation gave regarding Residential and Commercial Real Estate before the Subcommittee on Domestic Policy, Committee on Oversight and Government Reform, U.S. House of Representatives, on November 2, 2009.
Yes, I read it for fun and no I am NOT a geek no matter what my friends say.
As a commercial investor, I want to know what somebody smart thinks is going to happen. And Greenlee is smart. Here’s what he had to say:
U.S. banks are at risk of sizable new loan losses, particularly on commercial property, and some banks may not have sufficient capital to fully cushion against setbacks.
Some large regional and community banks that have built up unusually high concentrations in commercial real estate loans will be “particularly affected” by conditions in those markets.
Hmmm… commercial foreclosures are coming. And they’re going to come from portfolio lenders. Me likey.
This means that we’ll be able to pick up all sorts of income producing properties at deep discounts. Bulk REO deals, short sales and note buying are all strategies we can now utilize in a may-jah way in commercial.
And here’s the deal. The reason why these properties are headed to foreclosure isn’t because they aren’t cash flowing.
They are.
It’s because the market has declined in certain asset classes such as multifamily, office, retail and warehouse and the CAP rates that they were initially valued with haven’t held. So, the NOI is just fine. The CAP rates have just tanked.
The CAP rate looks a whole lot better when you can scoop up the property for .60 on the dollar. 
I’ve been a little burned out on real estate investing this year. It’s just not been as fun as some of my other ventures. But I think it’s about to get a lot more fun. I’m getting excited thinking about the possibilities in distressed commercial real estate.
The full text of Greenlee’s testimony is here.
Are you going to do one of your incredibly informative webinars on this, Susan! If so, I can’t wait!
You never know.
Hi Susan,
Property prices have already plunged from 3 years ago.If I can bid on an apt bldg with great cash flow and a cap rate of 10%,will I be at a disadvantage when the foreclosures do come.Its also possible that these foreclosures may require a lot of rehab.
No, not necessarily. If you’ve got a cash-flowing 10 CAP go for it.
Hi Susan
About the commercial Short sales what tips do you have in order to get financing for the acquisition of the property even when I do not any money to put under down payment I heard that some institution it will negotiate the short sale and it will give the financing for the property.
What other tips do you have if I would like to have some of this properties with in my portfolio and hire a professional management agency to manage and run the properties and resell them in a few years when the market have improved.
I would think that the big obstacle is get the Financing for the purchase after a successful short sale.
Thanks, looking forward to your tips.
Ricardo Mendes