Is a wave of commercial real estate notices of default and foreclosures going to hit the San Fernando Valley? And, with vacancy rates continuing to increase, who? going to fill those empty office and industrial spaces? These are a couple of the questions two panel discussions at The Valley Economic Summit last week attempted to answer. The first panel was titled, Foreclosures: Opportunities in Distressed Property Markets. Dr. Donald Bleich of California State University, Northridge moderated the panel. Other participants included: John Ellis of Integra Realty Resources, Wesley Avery of Roquemore, Pringle & Moore, Eric Forsberg of Bank of America, and Katherine Windler of the Bryan Cave law firm. With vacancy rates on the rise in some segments of the market, tight capital markets, and property values dropping, the number of distressed assets in the commercial real estate sector are increasing nationally, according to panelists. California is no exception. We?e at the start of the ?econd inning?of about an eight inning game, said Katherine Windler, a bankruptcy lawyer. Nationally, the number of 30-day and 60-day delinquencies has skyrocketed, term delinquencies are severely deteriorating, and all sizes of bank loans are weak, according to Windler? data. Acquiring distressed assets is also no small undertaking. Investors need to do a lot of due diligence prior to closing. There are often numerous claims against these properties, environmental problems and a host of other issues that can make the acquisition more of a liability than an asset. The panel did not provide specific numbers for the San Fernando Valley. The second panel was titled, Office/Industrial: With Vacancies on the Rise, Who Will Fill in the Openings? George Stavaris from Grubb & Ellis moderated the panel. Other panelists included: Chris Petterson of U.S. Bank, Roger Beck of Colliers International, Tori Robinson of Old Republic Title, and Peter Steigleder of Lee & Associates. Petterson said filling vacancies hinges on potential buyers or lessees having access to capital. Tight credit markets are making that tough these days. Credit departments are only financing companies that have a logical plan for repayment. Unsubstantiated revenue is killing a lot of deals. But if somebody has good credit and 10 percent down, they?e likely going to get financing in the $2 million and less range, said Petterson. Beck made the point that the medical office market continues to buck some of the other commercial real estate vacancy and rate trends in the Valley. Many small business owners are looking to the SBA for help with financing. And certain SBA fees are being waved as part of the national stimulus package. But there are many investors still waiting on the sidelines for the market to hit bottom. Private investors, foreign investors and high-net worth individuals are some of the most active in the market right now. Real Estate Investment Trusts are more often in the seller? seat these days, said Tori Robinson. Panelists seemed to contradict statements of the foreclosure panel, saying they are seeing very few distressed commercial assets on the market. There? not a dramatic increase in demand for environmentally friendly ?reen?buildings in the Valley, said panelists, despite there being some financial incentives available for companies choosing to use or build LEED certified buildings. Although some Fortune 50-type companies are inquiring about it. Audience members asked panelists about alternative sources of revenue for building owners. One questioned whether leasing roof space to solar panel companies is a viable option. Depends on how much roof space you have and whether or not you are willing to have that space altered to fit the panels, said Stavaris. Some property owners generate nominal income from allowing companies to install cell towers on the roof, added Stavaris.
