Blown Mortgage » Commercial real estate

Debt management, art of making the best of a bad situation

Andrew — Fri, 24 Jul 2009 02:45:03 +0000

Debt management, art of making the best of a bad situation

So you are in serious debt. Really serious debt. You are actually quite desperate because you have no idea how you got in such a pickle and even less of an idea how you are going to get out. Debt management is your newest best friend. What is debt management and how can it help you to get out of debt?
Debt management is the art of taking control of your debt and using the tools at your disposal to minimize the cost and damage of debt. Debt management is not a single solution like a magic pill or a silver bullet, it is more like a way of thinking, an attitude that helps you make the right decisions to get yourself out of serious debt.

Debt management affects our lifestyle, our spending habits and our financial decisions. The principles behind Debt Management are simple: Understand your debt, minimize your debt and control your debt.
This is how it works:

Understand your debt.
You need to know how bad your situation is before you can fix it. Many people develop such a phobia to their debt, they try to ignore it ostrich style, and this obviously creates problems of its own burying the person deeper into debt. So get paper and pen and write out exactly what you owe, that includes your mortgage, credit cards, car loans, everything and include the interest rates you are paying on them.

Minimize your debt.
The second step after understanding your debt is to start to managing your debt by taking decisive action. Your first priority is to work out what your income is and compare it to your monthly expenses. This is where debt management gets really hard. Often people who are in serious debt have got used to spending more than they have and reducing their quality of life or spending habits seems impossible. However you will have to be hard on yourself, get your income and work out a budget that will fit into it. Working out a budget is a living project you will never finish, in you might have to re-design your budget after step 3, the important thing is to realize your limits and stick within them.

Minimize your debt.
There are different ways of minimizing your debt, lets have a look at two.

Debt management tools that will help your minimize your debt include debt consolidation and creating extra income to pay your debt.
Debt consolidation refers to taking on a large loan to pay for a bunch of smaller loans. This can be beneficial because one large loan can mean cheaper monthly payments and a lower interest rate.

You can also try to create some extra cash to pay your mortgage from assets, selling things you no longer need or can do without, redeeming of shares and insurance policies. It is often worth cashing in on an investment that is growing slower than your debt, once your debt is under control you can start to save again.

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New Commercial Real Estate Lending Index Introduced

Jay Hammond — Mon, 18 May 2009 20:56:23 +0000

“Commercial Real Estate lending conditions will likely deteriorate further after a sharp drop in the first quarter of 2009, creating both new opportunities and challenges for community banks,” said Chris Nichols, CEO of Banc Investment Group the capital markets group of Pacific Coast Bankers’ Bancshares. “CRE lending conditions were impacted by a perfect storm of economic uncertainty, tighter credit, failing consumer confidence and substantially higher unemployment. Of particular note was the reversal of fortunes in the multifamily market, which had been fairing well, but turned negative in the first quarter.”

That is the conclusion drawn by the BIG CRE Index. Launched this month, the BIG CRE Index is the nation’s only forward-looking benchmark of the relative strength of commercial real estate (CRE) market conditions. The BIG CRE Index is published quarterly and focuses on the four major commercial real estate sectors – multifamily, office, retail and industrial – in America’s largest metro areas.

According to the CoStar Group, the so-called stress tests administered to banks by the Federal Reserve indicate that under worse case scenarios the 19 largest banks in the country could see commercial real estate losses of $53 billion in 2009 and 2010. This represents only 8.5 percent of all commercial real estate loans.

The initial BIG CRE Index reveals that CRE conditions worsened during the first quarter of 2009, falling nearly 11 percent to 80.58. The baseline period was defined as April 30, 2007.

Retail:

The retail sector index fell more than 11 percent to 78.36 from 88.07 in the fourth quarter of 2008. The retail sector has declined more than 20 percent from the 103.50 level seen during the second quarter of 2007.
Vacancy rates for neighborhood shopping malls soared to 9.5 percent.
Vacancy rates in regional malls rose to a record high of 7.9 percent.
Overall, 63 out of the 76 markets for which data was collected experienced a rise in vacancy rates. All but one posted negative rent growth.
Rent fell by 1.8 percent declining more in the first quarter of 2009 than the 1 percent decrease measured for all of 2008.

Office:

The office sector fell 10.62 percent during the first quarter of 2009 to 82.72 down from 92.55 during the previous quarter.
The office sector was hurt by the consolidation and downsizing in the financial services sector.
Office vacancy rates rose sharply during the first quarter of 2009 and now stand at 15.2 percent.
During the first quarter, 12.3 million square feet of office space was completed having vacancy rates of between 50 and 60 percent compared to the 30 to 40 percent vacancy rates of 2007 and 2008.
Nationally, rents declined by 2.3 percent.

Industrial:

The industrial sector of the index decline by nearly 17 percent during the first quarter of 2009 to 29.80. During the fourth quarter of 2008 the sector stood at 83.96. The sector is down more than 31.5 percent from the 101.91 reported during the second quarter of 2007.
The Index predicts the domestic warehouse market will soften as a result of weakness in the domestic shipping business.
Inventory is building up in coastal ports as less consumer spending decreases demand, a condition expected to further impact the industrial sector in coming quarters.

Multifamily:

The multifamily sector of the index dropped more than 6 percent to 91.43 in the first three months of 2009 from the 97.42 level of the final quarter of 2008. The sector is off only 3.81 percent from the second quarter 2007.
Vacancy rates rose to 7.2 percent during the first quarter.
Rent growth for the quarter was negative 1.1 percent.
Compared to the second quarter of 2007, the multifamily sector actually improved slightly during 2008. The economic downturn began making itself felt in the sector during the first quarter of 2009 as the number of vacancies increased while rents declined. Construction continued at a steady pace while net absorption rates dropped.

The quarterly percentage change in the Big CRE Index takes into account both macro economic factors and the specific default probabilities of each category such as employment, income, rents, vacancy and absorption rates. Movements of the Index are expresses as percent changes rather than changes in index points. Point changes are affected by the level of the BIG CRE Index in relation to the baseline period (second quarter 2007). Percentage changes are not.

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As vacancies soar, commercial space owners fight cutting rents

Constantine von Hoffman — Thu, 14 May 2009 18:36:04 +0000

A bad time to sell things is an even worse time to own property where things get sold. Thus the news that retail sales dropped “unexpectedly” in April means retailers are dropping as well. Here in Boston take a walk down posh Newbury Street and you will see many storefront “for rent” signs.

Other high enders are feeling the pinch as well:

And, not surprisingly, the troubles aren’t limited to the lux set. Vacancy rates at malls and shopping centers in the top 76 U.S. markets are the worst in the last 10 years: 7.9% for malls and 9.5% for smaller, open-air shopping centers, the Wall Street Journal reports.

Yet most retailers that ask for concessions don’t get them, retail landlords say. Several are responding to those retailers’ pleas by requesting financial data to prove they need a rent reduction to stay in business.

When owners do grant concessions they are trying to get something back — such as extending the length of the lease. Fascinating to watch a business try to swim against the rule of supply and demand.

Constantine von Hoffman is a veteran business journalist and social media consultant. He write the blog CollateralDamage, a satirical look at marketing and business.

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Don’t Forget Commercial Real Estate Problems

phillenbrand — Wed, 01 Apr 2009 23:00:49 +0000

I’m starting to wonder if the general public is getting used to the idea of being in crisis mode all the time. Health Care is in a crisis, there’s a crisis in retail, consumer spending, automakers, everywhere seems to be heading straight to the dumper. Even amidst signs of a recovery, there are areas we still need to worry about. Commercial real-estate loans, for example, are starting to go bad at a pace much faster than many expected. If this occurs, banks will be looking at billions in losses, something they can’t really afford given the public’s backlash against dumping money down what seems to be the equivalent of a financial black hole.

Experts are saying that the current slump in the commercial real estate market is looking like it may end up being similar to or perhaps exceed the one that occurred back in the early 1990s, when bad commercial property debt pulled us into a recession. As you might have guessed, we can’t really afford another recession causing event considering we’re already weathering a lengthy one right now. Delinquency continues to rise, however, doubling since September and pushing up to 1.8% this month. That’s about on par with the last downturn.

How bad it will get as always depends on who you ask. One well known hedge fund investor, George Soros, recently came out and said that he expects commercial real estate prices to drop 30 percent. This prediction, he says, goes to show that we’re still in a financial crisis, and that perhaps recovery isn’t just around the corner after all.

If it makes you feel any better, help is on the way from a number of sources internationally. Kevin Rudd, who’s the Australian prime minister, stated that 20 nations or so have pledged emergency fiscal stimulus packages, which if they work (and who knows if they will), that will help to alleviate the effects of the global recession. Here’s what he had to say on the stimulus efforts:
“It’s huge. As the IMF says if it [stimulus globally] had not been done in the course of the last several months, you’d have nearly 20 million people more who would be unemployed. It is significant and unprecedented, coordinated macro-economic action across the world’s largest economies.”

Domestically, Uncle Sam is doing his part to help cushion crashing commercial real estate securities. The government’s Public-Private Investment Program (abbreviated as PPIP, we need more acronyms), was introduced on Monday. Designed to help get toxic assets off the balance sheets of banks through public and private funding sources, the FDIC said that the focus of the government’s efforts in the program will take aim at residential as well as commercial real estate. Here’s to hoping.

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