There’s a new main character moving to center stage in the great real estate meltdown. Underwater homeowners vying to refinance or score a loan modification have grabbed much of the headlines (and bailout attention) to date. But now commercial real estate is moving into the spotlight as the next potential body slam for the economy. The story line reads like a sequel to the residential debacle: Commercial property owners are sitting on loans that need to be refinanced. The Real Estate Roundtable estimates that about $400 billion a year in commercial loans will need to be refinanced over the next decade. But with commercial property values way down, vacancies way up, and the recession making it unlikely there will be a demand pick-up anytime soon, banks haven’t been inclined to offer refinancing deals. Commercial real estate lending will be one of the last sectors to recover. Asset-based and residential lending will recover first. And when new commercial real estate lending does appear, it will be very narrowly targeted at first to particular projects or growth geographies, such as San Antonio, Texas, or Tulsa, Oklahoma, as opposed to overbuilt regions, such as South Florida or Las Vegas. The only commercial real estate deals being financed right now are those for user/occupier purchases of property in the $1 million to $2 million range. These loans carry tight constraints, such as those for traditional Small Business Administration loans, and a very conservative 60 to 70 percent LTV. For now, few if any third-party deals are available for investors to buy and then lease properties. While lenders may be interested in making those loans, investors can’t make the numbers work to get the returns their cash demands. "This is going to be the worst year since the 1991-92 industry depression," Stephen Blank, senior resident fellow for real estate finance at the Urban Land Institute, said in a webcast. "We expect to see drops in value, negative returns, sharp increases in delinquencies and foreclosures — it's a bleak picture." Commercial real estate can no longer hide from a "minefield" of troubles, including the country's deepening credit crisis, broken financial system, rising unemployment, high energy prices, housing crash, stock market volatility, global uncertainty and a mounting national debt that tops $11 trillion, according to Mr. Blank. The FDIC will seize dozens more banks and assume an enlarged role as the new RTC auction agent. And with the U.S. tax code treating relief of debt as receipt of income, many former wealthy stakeholders will lose most of their net worth in foreclosure and property forfeiture. They will also owe enormous sums in taxes resulting from recapture of previously taken depreciation and 1031 tax-deferred exchanges. The Mortgage Forgiveness Debt Relief Act, signed on Dec. 20, 2007, by President Bush, gave homeowners conducting short sales an exemption from paying tax on the forgiven debt if they met certain criteria. There has been nothing like this on the commercial side. With the uptick in loan modifications and interest rate changes, in addition to the financial and legal issues owners face, they could be faced with large tax bills. For instance, cancellation of debt produces income equal to the amount of the loan forgiven. Wilshire Holding Group, Inc. takes this Debt Relief. You Need Wilshire Holding Group, Inc.Don't Walk Away from your Commercial Property...Call Wilshire Holding's Commercial Division.
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Former President of 2 mortgage companies in Los Angeles, California and a former California licensed real estate broker, Claridge served as business development officer and Vice President Loan Officer for Union Bank, California; American City Bank; Imperial Bank and Lloyd's Bank, California. 
