Property Grunt

Tuesday, January 06, 2009

News for the New Year! Alot of it bad!

It appears the meltdown is unending.

As Vacant Office Space Grows, So Does Lenders’ Crisis

Vacancy rates in office buildings exceed 10 percent in virtually every major city in the country and are rising rapidly, a sign of economic distress that could lead to yet another wave of problems for troubled lenders.

With job cuts rampant and businesses retrenching, more empty space is expected from New York to Chicago to Los Angeles in the coming year. Rental income would then decline and property values would slide further. The Urban Land Institute predicts 2009 will be the worst year for the commercial real estate market “since the wrenching 1991-1992 industry depression.”

Banks and other financial companies have not had the problems with commercial properties in this recession that they have had with residential properties. But many building owners, while struggling with more vacancies and less rental income, will need to refinance commercial mortgages this year.

The persistent chill in lending from banks to the credit markets will make that difficult — even for borrowers who are current on their payments — setting the stage for loan defaults.

The prospect bodes ill for banks, along with pension funds, insurance companies, hedge funds and others holding the loans or pieces of them that were packaged and sold as securities.

Jeffrey DeBoer, chief executive of the Real Estate Roundtable, a lobbying group in Washington, is asking for government assistance for his industry and warns of the potential impact of defaults. “Each one by itself is not significant,” he said, “but the cumulative effect will put tremendous stress on the financial sector.”

According to MD Sass, the tax lien industry is also getting hammered.

I still recommend that all of you wait, watch and prepare.

But it is not all bad news. Remember the douchebag Marc S. Dreier?

His entire firm is f**ked not only because of his conduct but because he never paid the bills particularly the malpractice insurance. However even though his firm is screwed, the lawyers that worked for him look like they might be in the clear because of one simple reasons. None of them were made partner.

Lawyer Seen as Bold Enough to Cheat the Best

Mr. Dreier, 58, controlled the finances of his law firm to an unusual degree, according to lawyers there, because of the unusual way it was set up.

Mr. Dreier was the only equity partner in the firm, and deals were structured so that only he knew all the specifics and had access to all accounts, people with the firm said in court papers. Mr. Dreier convinced lawyers that such an arrangement was best by emphasizing that it would allow them to concentrate on their first love, the law, while he worried about running the firm.

Don't get me wrong. It sucks right now to be a lawyer for this firm, especially in this economy, but the fact fact that none of these lawyers made partner will hopefully be enough to clear them of any wrong doing in the long run.

Not too bright on Mr. Dreier's part. Then again with his current record, this should not be a surprise.