The Phoenix Commercial Market extend and pretend continues. It’s been going on for quite a while. That is, the Banks keep extending out Commerical Foreclosures and pretending the macro or micro environment for that property, or all their properties will somehow magically heal themselves. I can understand the “need to stay solvent” for the smaller community banks. Foreclosing on a $10,000,000 note takes a lot of lending out of float considering the average US Bank lends almost $10 for each one in reserves. Many small banks can’t take that hit on their books.
I don’t really comprehend why the big banks with the liquidity and the ability to borrow from the Fed’s credit window do it. Who else can borrow at 0.25% interest? I don’t think it will change anything by continuing to push the foreclosures out. Also, with the amount of lending decreasing and the amount of reserves increasing, most of these banks are in much better shape than 2 years ago.
What do they know that we don’t? I doubt a whole lot more, other than their balance sheets don’t look as rosy as we may think. It’s hard to get a feel for the true amount of CRE set to reset. We have all heard the trillions thrown out and the billions already in “pretend and extend” mode. There are a great deal of buyers out there in the Multi Family Real Estate market frothing at the mouth to buy at a discount. Yet I am seeing, 3, 4 and 5 caps out there for class A product around the board. The REIT’s are snapping up 5 cap properties left and right. They feel they can increase their return long term. But is the other shoe about to drop? Will we have a double dip recession? The question in the back of my mind is, is this 1930 and the other shoe is about to drop? Or is this 1975 and we will slowly rebound and go sideways for another decade?
Marc Brodeur BS, DC
Commercial Realtor
Marc@PhoenixCommercialRealEstate.com
Direct (602) 692-4288
www.PhoenixCommercialRealEstate.com
View Phoenix Commercial Real Estate Between $200,000 and $500,000
