Looks like the commercial mortgage arena will have a rough year in 2008. It is only the next logical foreclosure wave to hit the US and this tsunami may be the mother of all waves that drowns what’s left of our economy.
Reuters – Commercial property loans originated in 2005 to 2007 that increasingly carried risky terms are likely to see a significant increase in defaults in 2009 due to lack of credit, falling property values and reduced cash flow, said Alan Todd, head of commercial mortgage bond research at JPMorgan, in published research.
Commercial property owners have it tough these days. With no credit, no business and tenants not paying their rents, delinquencies and defaults are sky rocketing.
I see the collateral damage here daily in my home town of Corona California where the Linens and Things and several other establishments have simply closed shop and left town. Leaving only an empty 50,000 square foot building and memories of better times and well, linens and thingy migingies.
I suspect there are lot of linen thingy migingy companies filling many malls and shopping centers throughout the country and many will not pay their rent as they go bust.
Take for instance a new community here in Corona, Ca. called Dos Lagos that was less than a year old:
Reuters – The imminent default of two of the largest loans in CMBS less than a year old, including one for the Promenade Shops at Dos Lagos in a foreclosure-ridden area of California, this month helped propel bond risk premiums to record levels.
The whole Inland Empire here in Southern California where I reside was built on nothing more than real estate speculation with very little industry to fall back on. I suspect we will see a lot more Dos Lagos type foreclosure shell communities going down in 2009 throughout the US.
The question isn’t if, but when and where?
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