Pretend and Extend

23rd February, 2012 - Posted by Jeffrey S. Weil, MCR.h, SIOR - No Comments

The San Francisco, Peninsula and Silicon Valley office markets are still on fire, the East Bay grinding its way slowly to recovery without the rent spikes or huge leasing activity these more robust areas are experiencing … in the National Real Estate Investor Jan/Feb 2012 Editorial Director David Bodamer made an astute comment, “the pretend and extend tactic that lenders employed worked.  (This is where even though the loan may have been technically in default they allowed the commercial real estate borrower to make interest-only or other reduced payments just to avoid foreclosing and then being stuck with the property and with the write-down.)  Today, both lenders and borrowers have more options when dealing with distressed assets than they did 24 months ago.”… he goes on to comment that the CMBS sector, where back in 2006 and 2007 they bundled a total of more than $432 Billion dollars of loans, has started to come back with $35 Billion in CMBS issued in 2011 … and remember, much of that $432 Billion turned into problem loans … but it is better than $0!

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