REALTOR® Magazine-Daily News-Commercial Investment Remains Tough Sale

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Daily Real Estate News | November 19, 2009 | Commercial Investment Remains Tough Sale
Commercial real estate may prove to be more difficult for the federal government to bail out compared to residential real estate.

For one thing, getting legislative cooperation may prove challenging. Helping commercial mortgage holders doesn’t result in votes like helping homeowners. Second, banks have little motivation to bail out commercial loans because they don’t expect there will be meaningful revival of the market any time soon.

Theoretically, the Troubled Asset Relief Program (TARP) should have had a significant impact on the problem, but big banks hold only 29 percent of the $1.84 trillion of commercial real-estate debt, according to Foresight Analytics. Small banks and investors hold the rest of the loans and they got little or none of the TARP funds.

Regulators are trying to reduce the problem by changing the rules so fewer loans are underwater, but even if commercial real estate values rise, banks will continue to ditch commercial loans because investors aren’t interested in buying commercial paper.

Source: The Wall Street Journal, Peter Eavis (11/18/2009)