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Sec. 1111(b) And Commercial Real Estate Cases
09/21/2009
John Penn
A variety of sources predict a coming wave of commercial real estate problems. The prediction is that many of the acquisitions and refinancing of a few years ago are headed toward maturity in 2009 to 2011. Since many used funding vehicles that no longer exist, the conventional wisdom is that the defaults will soon begin. Just as summer follows spring, bankruptcies follow mortgage defaults.
The current economic conditions also come into play because today’s values are nowhere near where they were in the two years preceding the 2008 liquidity crunch. As more properties find themselves in trouble, no one expects real property values to increase significantly in the near future.
Those who argue that “the recession is ending” as an indicator that values might not fall further ignore the fact that a recession ends when the economy’s slide stops going further downhill. The ending does not mean that values have started improving.
Guest Column published in Law360, September 21, 2009. Reprinted with permission.
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