Friday, May 2, 2008

Denial = not just a river in Egypt

According to this report from CoStar, lenders are saying that while they don't expect a collapse, they are not eager to jump back to the 2004-2007 days, are selling CMBS portfolios, and have instituted thorough vetting processes.

And here is more anecdotal evidence about the credit crisis holding up deals from Robert Manor at the Tribune, including one unidentified developer using the word "meltdown" and reports, "even the strongest institutional borrowers are having difficulty getting money." (Exception: Self-storage, which may be why I have not seen Kenny Pratt post in forever.)


Good! I'll be the first person to say this should happen. Due diligence should be just that: due and diligent. The years prior to now were insane. Forget the legal fees; think about what is healthy in the market. Maybe I am in denial about how bad things really are, or maybe I am out of that league, but what I do know is that things are cyclical and it is nice not to have to worry about too much going on sometimes.

Now, I wonder how these lenders will feel about larger deals as they need to find 6% returns, as I mentioned yesterday. Hard to say. They may be too spooked or they may not. Delinquencies will be an interesting factor to consider; it appears the lag is catching up and delinquencies are rising, in which case people on the sidelines with cash may be looking for bargains from lenders who foreclose or do a deed-in-lieu. Case in point: I am watching a retail property in my area that I am hoping to get a group together to buy if it goes belly-up.

So let's see how all the predictions come out.

Finally, let me say one thing on very small commercial deals: I have lenders beating on doors to do small deals with interest rates over 6%. But again that is on small deals and for people with great credit.

(Courtesy of Deal Junkie.)

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