Stephen R. Blank
SENIOR RESIDENT FELLOW OF FINANCE
Urban Land Institute
By Darrick Meneken
In its 30th-annual “Emerging Trends in Real Estate” report, a joint venture with
PricewaterhouseCoopers, the Urban Land Institute (ULI) says this will be commercial real estate’s
worst year since 1991 and ’92. Stephen R. Blank, ULI’s senior resident fellow of finance, tells us why
the report forecasts double-digit price drops and a drought for owners looking to refinance.
More than 600 real estate experts contributed to the most recent “Emerging Trends in Real
Estate” report. What’s the consensus outlook for the commercial market this year? When
you total losses since the 2007 cyclical peak, property values will be down 15 percent to 20 percent
and possibly more. We’re going to see an increase in foreclosures and delinquencies. Refinancing
is a black hole.
The commercial-mortgage-backed-securities (CMBS) market shrank tremendously in 2008.
What are the effects of that, and what do you think the CMBS market might look like this
year? The CMBS market is closed. If you talk to people who are active in [the CMBS] business,
people can make a case that there will be no issuance in 2009.
[Thus,] we have a huge liquidity crisis. You can’t find capital to buy properties, you can’t find
capital to refinance existing mortgages, and there are all these theoretically toxic securities being
held by the financial institutions.
How should mortgage brokers react to this crisis? Brokers have to be harshly realistic with
themselves and harshly realistic with their clients. It isn’t going to be easy to get financing. That’s
not to say there won’t be any. Brokers should work on transactions where the clients are the
most-realistic, where they understand what’s going on in the marketplace and where they’re in a
position to act appropriately.
Don’t sit there and think that you’re going to be the one who’s going to outperform the market.
It’s just very hard to do.
How can brokers help solve some of the refinancing woes? They should work with their clients
to find other sources of [funding]. Maybe it’s a combined refinancing that uses a conventional
loan with an equity insertion from a mezzanine investor.
What else might create liquidity? Loans that are performing that are going to have a maturity
default could be extended. That’s good for the lender — it doesn’t really want to take the loss — and
it’s good for borrowers who can afford to continue to pay the interest and stay with the property.
Certainly, the fewer properties that go on to the market, the stronger values are.
Is there a risk of holding up values artificially? It’s not artificial. Instead of forcing properties into
foreclosure, let’s renegotiate the loans. Many owners can afford to pay their property’s debt service
but are going to have a maturity default based on the fact that underwriting is much stricter.
Who are the winners in today’s market? People who require low leverage. Anybody who’s not
a high-leverage buyer has a terrific competitive advantage.
Darrick Meneken is associate editor at Scotsman Guide. Reach him at (800) 297-6061 or darrick@scotsmanguide.com.
Next Month
… in April’s Scotsman Guide
Here’s what you’ll discover:
■ What went down at February’s
Mortgage Bankers Association
CREF expo
■ Why Sprint’s layoffs will affect
Overland Park, Kan.
■ Where the green scene — environ-
mentally friendly buildings, that
is — is heading
… and much more.
Online? Check out current and past editions of
Scotsman Guide at scotsmanguide.com.
5 Years Ago
From March 2004’s Scotsman Guide
“We are seeing cap rates dropping as low as 5
percent on certain property types … At the same
time, interest rates have reached a 40-year low.
This has definitely created a ‘sellers market.’”
CRAIG C. JOHNSON,
Aries Capital Inc.
“Capitalization Rates: How Low Will They Go?”
scotsmanguide.com/0971
View this article and others in our free article archive
at scotsmanguide.com.
Project SENIOR Solutions
Try it www.seniorsolutions-sc.org
Helping Hands
Each month, Helping Hands features a
mortgage professional or group that has
volunteered to lend a hand to others in need
By Ivanna C. Sukkar
Name Cindy Swafford, vice president of commercial
banking, Community First Bank
Site Anderson, Oconee and Greenville counties, South
Carolina
How Swafford says she volunteers primarily in a “board
and oversight capacity” with SENIOR Solutions, an organization that aids people ages 60 and older in three South
Carolina counties. The organization provides transportation, home-delivered meals, classes, adult-daycare centers, computer lessons, library services, special events and
more, Swafford says.
Cindy Swafford (center, holding check) and other SENIOR Solutions board members accept a
check from South Carolina’s Office of Aging, led by state Lt. Gov. André Bauer (second from left),
in 2004. They used the funds to help renovate the organization’s senior center in Anderson, S.C.
Photo: S wafford.
Swafford began volunteering with the 41-year-old organization in 2000, she says, and was the board chairwoman in 2006. This year, she will be board chairwoman for
SENIOR Solutions’ Lakeview Assisted Living division in
Oconee County, she says.
In addition, Swafford assists with SENIOR Solutions’ various services as needed, she says. She says she has delivered meals and visited and participated in dance classes,
among other things.
Why Swafford, who also volunteers with other nonprofits and charities in her area, says SENIOR Solutions is
“near and dear” to her heart.
She adds that SENIOR Solutions helped her care for her
grandmother nearly 20 years ago.
“[The organization] makes me appreciate the senior adults
in my life,” Swafford says. “They have great wisdom and
experience, and they brought us to where we are. We need
to appreciate [that] more.”
Impact People who take part in SENIOR Solutions’
services “love the organization,” Swafford says.
“They’re tickled that they have somewhere to come where
they are taken care of, where they can have a hot meal and
where they can interact with others their age,” she says.
Swafford adds that the organization helps seniors “
maintain their dignity and independence and helps them live
independently and remain healthy as long as possible.”
Ivanna C. Sukkar is senior associate editor at Scotsman Guide.
Reach her at (800) 297-6061 or ivanna@scotsmanguide.com.
To share your company’s story, e-mail helpinghands@scotsmanguide.com.
