| The next tidal wave in the financial tsunami-like | | | | be forced to be more aggressive in their collection |
| correction to the real estate market will be in | | | | process and in initiating legal action against defaults. In |
| commercial real estate. The recession has caused a | | | | all probability, increased cash requirements will reduce |
| lagging economic effect on these properties that is | | | | the flow of funds to this market segment thus |
| just now coming to the forefront. As companies all | | | | making future lending more problematic. As mortgage |
| across America have cut back, causing the increased | | | | funds become even more scarce, the prices of |
| unemployment now nearing 10%, businesses have | | | | commercial properties will certainly see reductions. |
| had no choice but to reduced their need for space. | | | | There will however be benefit in this scenario for |
| As these leaner enterprises have cut back on square | | | | those in a position to either weather the storm due |
| footage occupied, buildings are experiencing | | | | to high cash flows, low debt service, or who own |
| dramatically higher vacancy rates. This increasing | | | | their properties outright. In addition, those with a |
| vacancy has resulted in reduced income to ownership | | | | cash position adequate to facilitate new purchase |
| and has negatively impacted the ability of property | | | | transactions will see very attractive opportunities for |
| owners to meet their debt obligations. | | | | the long term. Unfortunately, some players with high |
| With approximately $500 billion dollars in commercial | | | | debt service and low cash positions will suffer, and so |
| loans coming due each year over the next few | | | | will some of our local banking institutions. The |
| years, you can expect to see the highest number of | | | | prognosis is still good however. The recovery is |
| defaults and foreclosures in recent memory. The | | | | happening at a more rapid rate than many expected, |
| greatest institutional impact of these actions will be | | | | and what a number of forecasters thought would |
| on smaller banks. The Fed is tightening its | | | | take a decade or more should in reality catch back |
| requirements and restrictions on all banks. Smaller local | | | | up in between 3 and 5 years. In the mean time, |
| banks, historically more "friendly" than their big | | | | investor buyer/owners who make good decisions, |
| brothers and who have operated on flexible lifelong | | | | conservative choices and manage tight fisted, will do |
| relationships with small business people are going to | | | | fine. |