Posted on July 27, 2011 by Ann
You have some money ready to be invested, and your friends who have recently put their cash in on commercial real estate say that now is the time to buy, when everything is low and the opportunities are great to invest. Do you do it?
The answer should be no, according to an article in GlobeSt.com which covered the Urban Land Institute’s “Real Estate, Finance and Investment 2011” conference held at the Sheraton New York Hotel & Towers in Midtown Manhattan last June.
What’s causing the bubble?
As part of a panel entitled “Investment and Finance Strategies for New Acquisitions and Development Today”, leaders from well-known companies such as CBRE Capital Partners, Prudential Real Estate Investors, Dune Capital and Bank of America Merrill Lynch all agreed that the current commercial real estate conditions are conducive to the next real estate bubble which preceded the big economic crash of recent years.
While commercial loans are slowly coming back, they are only doing so to the tune of $14 billion, according to Ethan Penner, president of CBRE Capital Partners. This figure, he says, will barely make any progress to “plug a deep financial hole” that we are finding ourselves in.
And while some may say that CMBS loans are leading the path to recovery, Penner disagrees. According to him, investors are taking “massive and imprudent risks” in quickly getting rid of their capital so they can get a return on their investment. As a result, investors are making hasty decisions and coming into a market that many believe is sure to crash again.
Investors beware
What does this suggest? If you’re a commercial real estate investor, hold off on investing and keep an eye out for CMBS loans, which are creeping back up gradually, but not fast enough to make the significant financial impact they need to make.
Perhaps you can take a cue from folks like J. Allen Smith, CEO of Prudential Real Estate, whose current investment focus is on building rather than acquiring – senior housing and apartment complexes are Prudential’s investment focus according to Smith. Putting it as plainly as possible, he explained, “There’s no reason for us to be pushing to levels we are uncomfortable with, so we are backing off.”
If you’re already in too deep
Of course, if you’re already in the market and your commercial loans need restructuring, you will need a hand in navigating these uncertain economic conditions so that you may get the loan restructuring you need. 1st Service Solutions has successfully helped restructure over $2 billion in CMBS loans and currently has about $4 billion in the pipeline. Our professionals will help you partner with the CMBS parties to ensure a satisfactory outcome for all involved.
To find out more about how 1st Service Solutions can help you restructure your commercial real estate loan, visit us at www.1stservicesolutions.com or visit our Facebook page.