The landmine of commercial real estate

Posted Nov 28th 2008 9:09AM by Douglas McIntyre
Filed under: Economic Data, Financial Crisis

Some retailers will be OK after this holiday season. They are big enough or have strong enough balance sheets to keep them afloat.

But commercial real estate loans could push some businesses to the wall, and soon.

According to the AP, one expert pointed out that "We're probably in the first inning of the commercial mortgage problem," said Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey. Amounts due next year will be in the tens of billions of dollars. Of course, banks will be stuck with those loans.

So, what happens? Banks have already been hit by everything from toxic derivatives to credit card and LBO losses. Now, they get to face another wave of defaults. And businesses with mortgages due may end up closing, putting more people out of jobs.

In all probability, the Treasury will get into the commercial loan bailout business to save banks and employment. Qualified businesses will get extensions and the government will offer credits to banks to accomplish this. Taxpayers will get one more burden.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Tags: inthenews

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Reader Comments (Page 1 of 1)

11-28-2008 @ 12:15PM

William Turnbull said...

The more government messes with this the worse it will get. Pumping a trillion dollars of worthless paper into our currency is not going to help, and its value is being falsely held up by almost all nations except Japan. The the dead skin fall and be replaced by new, healthy skin. There is no way to keep it alive.

11-28-2008 @ 11:21PM

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