Remington Capital – Brad Sweet

Commercial Mortgage defaults have hit their highest since 1992. It is believed that the current rate will soon surpass the all-time record of 4.55% by the end of 2010.

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“Increased uncertainty” is how the Federal Reserve describes the outlook for commercial real estate across the country in 2010.  “Formidable headwinds” are still blowing against the economy, Fed Chairman Ben Bernanke warned.

Triggering the Fed’s latest and bleakest CRE report to date are climbing vacancy rates, downward pressure on rents, little if any new development activity, and “increased uncertainty” about refinancing prospects for maturing commercial debt, “especially given the value of collateral has declined.” Adding greatly to the Fed’s low expectations for commercial real estate is the weak job market.

Continued high level of unemployment poses a major deterrent to any CRE turnaround. Despite some anticipated “modest” economic growth in 2010, the jobless rate nonetheless is expected to remain stubbornly high next year, ranging from between 9.3% to 9.7%, compared to the current 10%. The Fed warned that it could take 5 or 6 years for the job market to get back to normal.

All of which bodes poorly for the near-term outlook for commercial real estate, which desperately needs job growth to kick-start its recovery.  As if that weren’t distressful enough for owners and developers, about $1.2 trillion in existing commercial real estate debt will be maturing during the next four years – and much of it doesn’t have a prayer for refinancing. The banks, because of their own problems with managing deteriorating folios, just aren’t up to it. And even if the liquidity crisis weren’t a problem and owners could find financing, it’s estimated that two-thirds of those owners that took advantage of the easy-money days of 2005-2007 to nail down highly-leveraged debt would not be able to qualify for refinancing with today’s much more stringent terms.

What’s the answer for distressed owners who need to refinance but can’t?  Those thousands of owners who can’t find financing could sell or declare bankruptcy, of course, but that’s not much of an answer. The real answer is Recapitalization!

Recapitalization may cost commercial real estate owners equity, but it keeps them in the game until recovery occurs, and they can share in it.

As for brokers, recapitalization of troubled properties is a new business opportunity.  At Remington, we refer to that opportunity as the Remington DOR program – short for Distressed Owner Recapitalization.

The way the DOR Program works, quite simply, is that we partner with brokers and distressed borrowers, using the Remington global network of private sources of fresh, new capital for investment in troubled properties. That’s it. We do all the work. And you share in the benefit.

To find out more about the Remington DOR program and how it can work for you, please give me a call. To a happier new year!  Brad Sweet – Remington

Remington has since 1993 secured hard money capital and financial services for real estate owners and developers worldwide. Remington is an expert in hard money loans, a higher-risk loan that usually is based on the quick-sale value of a property. Hard money loans are often issued for financially distressed properties.

We recommend hard money loans in cases where there is sufficient collateral and a promising business or financial plan. Remington offers an extensive network of private and public lending partners, dramatically improving close rates for borrowers in need of a fast-closing loan. With a successful track record of closing hard money transactions, Remington delivers competitive transaction options even in these challenging market conditions.

Hard money loans may be issued for non-traditional properties or borrowers – including property owners who may have missed a mortgage payment or real estate developers that are looking for immediate support.

We look for companies that operate in expanding market sectors including specialty manufacturing, resource development and service providers. Remington will consider securing financing on a diverse variety of commercial properties including mixed-use, apartment buildings, assisted care facilities, business investment capital, corporate loans, commercial real estate, special purpose properties (such as car washes), construction loans, hotels, land development, retail, office and industrial properties.

A hard money loan is easily recognized by distinguishing characteristics including its ability to close quickly. Although a hard money loan typically carries more costly rates and fees, borrowers continually turn to this specialty loan because it can move from start to close in 30 days.

If you are looking to move quickly to take advantage of a low-cost property, to avoid foreclosure or any other issue, please give me a call and let’s discuss the hard money option.  Thank you – Brad Sweet

One of my team members here at Remington Joel Nathanson has already commented on this week’s report that commercial real estate prices will stabilize within the year. It’s hard to foresee an increase in prices right now with so many foreclosures, lack of liquidity and bankruptcies in the marketplace. But now some experts are predicting that a recovery is right around the corner.

According to this most recent article, while 12-month trailing prices declined across the board during the third quarter, pricing is beginning to inch up for several property types on a quarter-to-quarter basis.

Quoting from the article: “Over the coming year, as the process of repricing and an increasing number of distressed properties create more uncertainty for all investors, commercial real estate will face the greatest challenges that it has seen since the 1990s,” Riggs said. “The hope is that the rapid repricing, which has already occurred over the past 12 months, means that this process may also end more quickly than it has in previous commercial real estate recessions and that prices will not decline much further or fall off the cliff.”

This news is telling many investors that the commercial real-estate market may be at the bottom. Across the board
purchase prices have inched up over the last 2 quarters with multifamily and industrial being the top rated properties for existing investment. Skeptics, though, still look at the number of banks that are just unwilling to negotiate with owners and the number of commercial real-estate owners that are forced to turn in their keys to the lender and go into bankruptcy. It seems that they have no choice once the bank says that won’t refinance that not and they are upside down on their mortgage.

In a preemptive strike to these dire conditions for commercial property owners, Remington launched our Distressed Owner Recapitalization Program which offers the owner options, not foreclosure or bankruptcy. Please call me for more details if you know an owner who is facing a difficult financial situation and needs access to capital.  Thank you!  Brad Sweet.