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Wednesday, Sep 28, 2022

Firms Busy Dealing With Distressed Properties

The flood of distressed commercial properties that some predicted two years ago still has not materialized. But lingering national fallout from the recession continues to keep life busy for locally based firms, including Trigild and Douglas Wilson Companies, that deal with receiverships and related special servicing tied to property loan delinquencies.

San Diego-based Trigild, for instance, recently teamed with Terra Academy Partners, a real estate finance and investment firm with San Diego and New York offices, to form a joint entity known as Trigild Financial Services.

Judy Hoffman, Trigild’s director of corporate operations and longtime principal, said the main purpose of the venture is to link up potential buyers of distressed property with what has become an increasing array of financing sources, including banks, insurance companies and private investors.

“It’s one thing to find a good deal, but if you aren’t able to get financing, it’s not going to do you much good,” Hoffman said.

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Trouble Spots

While the San Diego region is not immune, most of Trigild’s caseload stems from property woes outside the area — places including Sacramento, the Inland Empire and large swaths of Arizona, Nevada and Florida, which were hit hardest by the housing meltdown that has since caused problems for the commercial sector.

Hoffman said Trigild’s property caseload this year remains on par with 2010, but things have calmed down since the peak crisis period of mid-2009. Distressed properties are now being disposed of through sales at about the same rate they are arriving on Trigild’s doorstep, a general sign of recovery compared with 12 to 18 months ago, when problem cases were piling up.

According to the New York research firm Trepp LLC, 7.9 percent of loans on large San Diego County commercial properties were at least 30 days delinquent as of the end of June. That was below the national rate of 9.3 percent.

Trepp primarily tracks loans that are bundled into what are known as commercial mortgage-backed securities, also known as CMBS. The loans are made in the purchase of office, industrial, retail, multifamily and hospitality properties.

The research firm noted that there were 35 local commercial properties at least 30-days delinquent on loans in June. Of those, seven were 90 days or more past due, 12 had gone into the foreclosure process, and 13 had been taken over by their lenders.

The total balance on delinquent local loans has generally gone down, from $737 million last June to $723 million this year.

At San Diego-based Douglas Wilson Companies, which handles a nationwide caseload through four offices, Chairman and CEO Douglas Wilson said the lender approach long derided within the industry as “extend and pretend” actually worked to the benefit of commercial real estate.

Modified Loans

Rather than dump ailing properties on the market at fire-sale prices, lenders nationwide worked with property owners to modify the terms of their loans. That bought the industry time for the overall economy to improve, helping to raise property values and increase buyer interest as financing rates remained low.

Still, Wilson’s firm continues to handle lender-seized properties, such as shopping centers, in places like Phoenix, Las Vegas and the Midwest, where developers launched commercial projects in anticipation of serving new households that never materialized once the housing market went bust amid mortgage woes.

He expects his firm’s caseload in 2011 will remain on par with 2010, although the commercial real estate financial situation nationally is still much better than it was in mid-2009, shortly after the Wall Street meltdown.

“It’s not necessarily robust, but there is a recovery going on,” Wilson said.


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