Commercial Real Estate Finance

Posts Tagged ‘RTC’

While many people are questioning the Federal Deposit Insurance Corporation’s (FDIC) strategy for managing assets seized from failed banks, we must look to the 1980’s Savings and Loan Crisis to see the reasoning behind their “risky business”.  In 1989 the Resolution Trust Corporation (RTC) was an asset management company established by the Financial Institutions Reform Recovery and Enforcement Act (FIRREA), and charged with the liquidation of insolvent assets belonging to failed banks.  These assets were primarily real estate-related assets, and between 1989 and 1995 the RTC closed or resolved 747 thrifts with total assets of $394 billion. Read the rest of this entry »

If you enjoyed this post, make sure you subscribe to my RSS feed!

Opportunity funds have commonly been attributed as those who target lower quality buildings who often need additional investment for repositioning.  In return, they are supposed to achieve higher returns, with benchmarks in the high teens that reflect the higher risk associated with them.  Therefore, its not too much of a stretch to imagine that there would be more opportunity funds being raised in light of the recent economic distress and the toll it has taken on the commercial real estate industry. And there are. According to private equity research firm Preqin, 182 opportunistic vehicles are out there trying to raise money right now, with a target of $95 billion.   But if everybody sees things the same way, does that mean its still a smart bet? Read the rest of this entry »

If you enjoyed this post, make sure you subscribe to my RSS feed!

Editor’s Note: Several of us at Llenrock Group have been teaching a course on the capital markets for commercial real estate broker’s continuing education requirements. As the last installment in a three week blog series, this week Questionable Brokers will  posit questions regarding Deal Structure. Click here for Part 1 (Real Estate Metrics). And click here for part 2 (Types of Capital) Enjoy!

Q: Why haven’t there been as many distressed properties coming to the market as was expected / predicted?

Read the rest of this entry »

If you enjoyed this post, make sure you subscribe to my RSS feed!

Ever wonder how people become successful?  How people go from nothing to the top of the world?  Or does unabashed success seem like an unattainable pipe dream that happens to “other” people, much like winning the lottery? In this video courtesy of the Wall Street Journal, Barry Sternlicht essentially gives the humble and abbreviated version of how he went from an unemployed 31 year old with a baby on the way, to the CEO of the biggest hotel company in the world just seven short years later. Color us at Llenrock impressed. Read the rest of this entry »

If you enjoyed this post, make sure you subscribe to my RSS feed!

In the commercial real estate space, you likely by this time have heard the phrase “extend and pretend,” usually in reference to what a bank will do when faced with a non-performing loan coming due on their books.  Rather than foreclose and ending up owning an asset, which banks are not in the business of (nor do they have the proper asset and property management staff  requisite to keep the asset from devaluing further over time), they would rather extend the term of the loan and allow the borrower to continue to try and turn the asset around. In the mean time, they will sit on there collective hands and pretend there is no impending doom in relation to the asset, or their portfolio full of similar problem properties.  After all, it is likely the borrower is more of an expert in how to fix the asset’s issues than the bank.

But after attending a brokerage conference last week that was full of investors of the four major food groups (multi-family, retail, office and industrial product), I think perhaps that there is a new phenomenon.  Banks may be extending and pretending, but investors are doing the opposite: Pretending and extending….as in their hopes and expectations for their assets, and the markets for them. Read the rest of this entry »

If you enjoyed this post, make sure you subscribe to my RSS feed!

The Week of September 5-11

- And the REIT deleveraging continues…

- The toilet is starting to overflow, as five more banks got flushed.

- A huge Colorado condo development owner has filed for Chapter 11.

- A recent study by Jones Lang LaSalle shows that CRE velocity will pick up, while values will remain flat.

- Where GM might have failed, GE plans to succeed. Read the rest of this entry »

If you enjoyed this post, make sure you subscribe to my RSS feed!

It seems that everywhere you turn today, another real estate company is raising a “distressed debt” fund.  The logic of course is simple.  People are trying to reduce their illiquid investments, and property is illiquid. Why buy new property, which carries with it all sorts of unknowns (including value) when there is seasoned, mature and rated product available in the form of distressed debt? Many property operators seek “loan-to-own” scenarios, in which they buy debt with the hope that the current borrower will default, thus triggering their ability to foreclose on the property, as a potential way of acquiring desirable product super cheap.  If they never have to foreclose on the asset, then at least they are making a known return.

Even operators with a historical penchant for development are forced to investigate the world of distressed debt.  After all, with property values having plunged over the last 18 months, its not as if the cost of building new product will look attractive anytime soon when you can buy existing product vastly below replacement cost. Thus, even developers must get involved as their traditional model has been rendered ineffective, at least in the short term. Read the rest of this entry »

If you enjoyed this post, make sure you subscribe to my RSS feed!