Looking for a
Confidence Boost
Despite a generous TARP infusion to banks
and a history of comebacks, commercial property
fundamentals continue to make investors nervous
By Carl Cronan
LENDERS COULD SURE USE A BOOST OF CONFIDENCE IN THE COMING
year where commercial real estate debt is concerned. Rising unemployment,
declining consumer sales, flagging REIT performance and no economic recovery in sight are all making bankers more nervous going into 2009 than they
already were.
On the other hand, the federal government saw fit late last year to
ladle $250 billion in Troubled Asset Relief Program funds over banks
that will need to be put to good use somewhere. And it is still widely
believed that commercial real estate is faring better than many
other investments, namely stocks and bonds.
Yet it’s difficult to convince some of those with the combina-
tion to the vaults that commercial sectors have consistently
remained solid, and will regain strength in the next up cycle.
In other words, as one banker put it during the RealShare
Central Florida Conference last October, there’s a big dif-
ference between the ability and willingness to lend.
“It all points to the fact that people feel fundamentals
are going to weaken significantly in 2009,” observes
Craig Butchenhart, president and director of capital
services of Philadelphia-based NorthMarq Capital
Inc. “Lenders don’t want to step out in a big way
into a market where they think things are going
to get worse.”
The problem isn’t simply limited to the
US. Howard Roth, global and Americas real
estate leader for Ernst & Young LLP in
New York City, pointed out during a Dec.
17 GlobeSt.com webinar that people
underestimated how much the credit markets are bound around the world: “The
securitization mechanism is there, but the
market is almost totally shut down.”
How much worse things will get before
they get better remains a lingering ques-
