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The Investor’s Marketing Forum (IMF) met this past Tuesday in Orinda. Our moderator Dave Carney facilitated an engaging conversation about the financial state of the commercial real estate economy. Jeff Shaddy of Pacific Capital spoke to share insights as to the amount of debt coming due in the next several years. Commercial Real Estate loans will need to be refinanced because most if not all commercial loans are amortized over 25 or 30 years BUT, the term is usually no longer than 10 years. That means a balloon payment at the end of the term. Shorter terms usually provide lower interest rates and so at the time of acquisition, lower rates were more attractive to investors. Now those loans are coming due and with the extinction of the commercial mortgage backed securities (CMBS) market there is literally no place to refinance! Jeff indicated that 2010 will have more loans coming due than 2009. In fact, each year going forward will have more commercial debt coming due than the previous year until we peak in 2014.

What are lenders doing if there is no vehicle to refinance? The phrase ”Kick the can down the road” and “Extend and pretend” is becoming the short term solution for banks.

In a recent article from CNN Money.com a similar message was conveyed. As for property vacancies, the article “The commercial real estate dilemma” by David Ellis predicts that property vacancies will continue to rise in 2010 and that property values could approximate half their value from the 2007 peak. Click to read the full article.

Now more than ever it is critical to have expert analysis of your property valuation. If you are considering acquisitions, help yourself and your family’s financial well being by seeking the advice of a professional. Should you be holding out for “your price” on a commercial real estate asset, be certain your holding expenses do not exceed returns on new opportunities. In our IMF meeting, it was discussed that in our lifetime we will not see such a dramatic correction in property values.

If you or someone you know is looking to sell or buy apartments or commercial real estate or just one commercial property OR if there is a consideration to learn more about group investments in commercial real estate please contact me. I can be reached via email at Pete@CommercialMasterMinds.com or just call (925) 719-3569

To learn more about my background, visit Consult Pete. To learn more about my company services, visit Commercial MasterMinds.

Continued Success, Pete