Finance, Real Estate Leaders Convene in San Diego for Trigild Lender Conference
Annual Industry Event Attracts Record Breaking Crowd
SAN DIEGO, CA -- More than 400 financial and commercial real estate experts from around the country convened in San Diego last week for the ninth annual Trigild Lender Conference.
“This was our most well attended conference ever,” said Judy Maxwell Hoffman, executive vice president of Trigild and event founder. The overwhelming interest in this year's event is not surprising. “Lenders are looking for strategic ways to minimize losses, and that is what this conference is all about.”
The event, titled “Roads to Recovery,” addressed key industry trends and vital statistics, with respected industry experts exploring hot topics and “how to” strategies in the real estate and lending markets.
Participants learned directly from professionals who are handling this economy's toughest, most complex commercial loan workouts, receiverships, dispositions and foreclosures.
Attendees also got a snapshot of the overall economy from keynote speaker Jeff Thredgold, a noted economist and former senior vice president and chief economist of banking giant KeyCorp. “The majority of forecasting economists see solid U.S. economic growth returning, with positive growth expected next year,” Thredgold said. According to Sam Chandan, another keynote speaker who is president of Real Estate Econometrics in New York and an adjunct professor at The Wharton School at the University of Pennsylvania, consumer sentiment is also on the upswing. “People are beginning to see the potential for recovery.”
Commercial Real Estate: Bleak Times Ahead
Unfortunately, for the commercial real estate sector, there is no end in sight - the distressed market is still in its early stages. According to Trigild president Bill Hoffman, “we have a ways to go until we hit the bottom - the end of 2010 or later.”
In fact, “while most of the housing pain is behind us, the bulk of distressed commercial real estate sales are yet to come,” Thredgold said. Nationally, commercial defaults are on the rise. According to Chandan, the rate for commercial mortgages helped by depository institutions increased by more than half a percent, from 2.25 percent in the first quarter of 2009 to 2.88 in the second quarter. “We are at a 15 year high in commercial defaults,” he said. “As we observe larger commercial defaults, credit constraints in the market will continue to worsen. Nearly $400 billion worth of mortgages will mature by this year alone.” A whopping percentage of these will not qualify for refinancing because of plummeting values and tight underwriting criteria.
Patrick S. Sargent, a partner with Andrews Kurth in Dallas, echoed Chandan's sentiments. ''We have a huge influx of commercial loans coming due, and therefore a desperate need for refinancing options, and a likely opportunity for REO buyers."
No area is immune to the problems in the commercial real estate industry, but some sectors are in worse shape than others. Experts agreed that retail has replaced multifamily as the number one problem asset. According to statistics, this year there have been 8300 retail closures to date, while last year's total was 6900. The office sector, closely tied to jobs and corporate downsizing, will be the next shoe to drop. The hospitality industry is also in for a long slump. “If you built or borrowed on a hotel in the last three years, you are probably in trouble,” said Hoffman. “I'm anticipating a huge influx of hotels going into receivership.”
Doing Business With Uncle Sam a Sign of the Times
Experts discussed the plethora of government-sponsored programs - more than 30 - all designed to stimulate the economy. “Government intervention has been an attempt to inflate the market,” said Chandan, and “the government assumes the risk.”
One of the significant issues is the future role of Fannie Mae and Freddie Mac, as congressional lawmakers gear up for a major debate in 2010 over how to restructure both home loan giants. “There is a potential for their role to be more limited,” Chandan said.
The consensus: the government has given banks a good deal. “Everyone is still waiting to see how it will play out,” said William Eckland, a partner with Sidley Austin LLP in Washington DC. “It's been a tumultuous year,” added Brian Olasov, managing director of the Atlanta office of Mckenna Long & Aldridge, LLP “Wall Street conceded its authority on commercial real estate to Washington.”