THE CASH MUST FLOW

By
Commercial Real Estate Agent with Coldwell Banker Commercial NRT

I have been wondering if the BAILOUT Rescue Bill that was pushed through

Congress will help or hurt commercial real estate. As the bill stands, banks are not under any 

pressure to loan money. Under the best of circumstances the

 money that has been allocated to the banks will be freed up for loans.

If banks will then start to lend once again based on the value of the cash flow of each

individual property, then I believe that the commercial market will rebound much faster

than the residential market. The only exception that I see lies within retail.

 

When there are so many retail stores and chains in trouble facing bankruptcy it is hard to imagine a

quick turnaround. In fact, retail as we knew (know) it may never return. It even looks like the large malls

may be phased out.

 

If the banks don't start funding commercial real estate soon then the entire commercial market will remain

in trouble. There are plenty of willing purchasers for commercial buildings, and many have signed contracts

of sale, but they will never close because the buyers don't show enough income without the banks

taking into consideration the revenue the buildings produce. Actually, most are not allowing that income

to be used at this time.

 

Since the Government has entered the private sector, I hope that it will follow the example of the European

Governments who have demanded more from their banks. They have stipulated that the banks may not just

hold the money as many of our banks are doing, but that they must make loans as well. To correct our

commercial real estate market in the United States only one thought comes to mind... The cash must flow.

 

 

Comments (2)

Steve Hewson
KW Commercial Real Estate, LLC - Denver - Denver, CO
Denver Metro Comnulll Real Estate

Richard, You're one of the daring few to wirte anywhere on the internet about the effects of the rescue plan on commercial lending.  I can't resist adding a few of my thoughts. Of course we have been seeing tightening of requirements before the recent crisis.  Banks were already being discouraged by the government from making commercial loans.  Despite the low, low foreclosure rate for commercial loans it seems the government regulators lumped commercial loans into the residential category.  The old saying that banks will only loan to people who don't need the capital still applies.  Also, the insurance companyies who are a major lender on larger properties have pulled back.  Only the highly qualified borrowers with 35% to 40% cash are looked at by the banks and insurance companies.  In addition, the property has to be perfect. 

Oct 13, 2008 10:57 PM
Richard Halpern
Coldwell Banker Commercial NRT - Ellicott City, MD

Steve, Thank you for the additional input and information. One of the bankers that I spoke to last week echoed what you said in your comment. They are afraid to lend on commercial projects unless everything is "PERFECT."

Oct 14, 2008 01:59 AM