Be Careful What You Wish

Commentary:

I was reading an article in the Wall Street Journal  about the billions of losses locals banks may experience on the potential default of commercial real estate loans

Another article in the National Real Estate Investor  talked about how the major commercial real estate brokerage companies were wringing hands waiting and hoping for a new business line of distressed property work to come their way.

It reminded me of the late 80s and early 90s during the savings and loan crises when the Fed set up the Resolution Trust Corporation (RTC). Many property owners and developers lost their properties through foreclosure during that time. Although some developers formed REITs.

I don't think we'll have another RTC. Although, I do think what some people are forgetting, or what some of the newer real estate agents out there may not realize, is that in all probability some troubled property owners will file for Chapter 11 Bankruptcy prior to foreclosure. This will most certainly delay the distressed property work from coming down the pipeline as it works through bankruptcy court.

But more importantly, brokers that are owed leasing commissions will be relegated to the status of an unsecured ceditor, and in all likelihood may never collect the commissions that they've earned. This was the case for many leasing brokers during the days of the RTC.

I can't help but wonder if the brokerage companies that are fortunate enough to eventually get this distressed property work, will actually be working twice for the same amount of money.