MLKlein

Sam Zell: 'Very Few CRE Financings from 2003-2007 Are Above Water'

In the CRE world lenders and owners are moving from the denial to the fear stage. Bank lenders will have to reappraise at maturity and that is when the real panic will set in. Appraisers will, to protect their ass(et)s, take very hard looks at vacancy, absorption and concessions and will take very conservative approaches to cash flow and the resulting value. This will trigger appraisal shortfalls and loan classification. Classified assets will increase rapidly over the next twelve months and will put increased demands on already overburdened capital structures. The Banks will have to capitulate and realize the truth; many properties will require that their capital be restructured through write downs or foreclosure. The smart banks are doing this now but there are very few banks with bankers that have the experience to remember the good advise given earlier which is to get out early and move on.