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News from the 2009 Trigild Lender Conference
Trigild Lender Conference Addresses Key Industry Trends, Attracts Record Breaking
Crowd
More than 400 financial and commercial real estate experts from around the country
convened in San Diego two weeks ago for the annual Trigild Lender Conference.
"This was our most well attended conference ever," said Judy Maxwell Hoffman, executive
vice president of Trigild and event founder. The overwhelming interest in this year's
event is not surprising. "Lenders are looking for strategic ways to minimize losses,
and that is what this conference is all about," Hoffman said.
"I do loss mitigation, and this event speaks exactly to what I do," said Kristin
Berg, associate director of asset resolution at Freddie Mac in Chicago.
To that end, the event, titled "Roads to Recovery," addressed key industry trends
and vital statistics, with respected industry experts exploring hot topics and "how
to" strategies in the real estate and lending markets."Trigild really did their
homework - nailing the issues that are pertinent today," said Richard Marion, vice
president Deutsche Bank.
The event is "consistently excellent every year," said Nelson Phelps, vice president/assistant
general counsel CW Capital Asset Management, LLC in Washington D.C. "It's a great
place to get a pulse of what's going on across the county."
Attendees also got a snapshot of the overall economy from keynote speaker Jeff Thredgold,
a noted economist and former senior vice president and chief economist of banking
giant KeyCorp. "The majority of forecasting economists see solid U.S. economic growth
returning, with positive growth expected next year," Thredgold said. According to
Sam Chandan, another keynote speaker who is president of Real Estate Econometrics
in New York and an adjunct professor at The Wharton School at the University of
Pennsylvania, consumer sentiment is also on the upswing. "People are beginning to
see the potential for recovery."
Commercial Real Estate: Bleak Times Ahead
Unfortunately, for the commercial real estate sector, there is no end in sight -
the distressed market is still in its early stages. According to Trigild president
Bill Hoffman, "we have a ways to go until we hit the bottom - the end of 2010 or
later. Until credit markets loosen and jobs increase, things could go from bad to
worse."
In fact, "while most of the housing pain is behind us, the bulk of distressed commercial
real estate sales are yet to come," Thredgold said.
Nationally, commercial defaults are on the rise. According to Chandan, the rate
for commercial mortgages helped by depository institutions increased by more than
half a percent, from 2.25 percent in the first quarter of 2009 to 2.88 in the second
quarter. "We are at a 15 year high in commercial defaults," he said. "As we observe
larger commercial defaults, credit constraints in the market will continue to worsen.
Nearly $400 billion worth of mortgages will mature by this year alone." A whopping
percentage of these will not qualify for refinancing because of plummeting values
and tight underwriting criteria.
Patrick S. Sargent, a partner with Andrews Kurth in Dallas, echoed Chandan's sentiments.
''we have a huge influx of commercial loans coming due, and therefore a desperate
need for refinancing options, and a likely opportunity for REO buyers."
No area is immune to the problems in the commercial real estate industry, but some
sectors are in worse shape than others. Experts agreed that retail has replaced
multifamily as the number one problem asset. According to statistics, this year
there have been 8,300 retail closures to date, while last year's total was 6,900.
The office sector, closely tied to jobs and corporate downsizing, will be the next
shoe to drop. Hospitality is also in for a long slump. "If you built or borrowed
on a hotel in the past three years, you're probably in trouble," said Hoffman. "I'm
anticipating a huge influx of hotels going into receivership."
Doing Business With Uncle Sam a Sign of the Times
Experts also discussed the plethora of government-sponsored programs - more than
30 - all designed to stimulate the economy. "Government intervention has been an
attempt to inflate the market," said Chandan, and "the government assumes the risk."
One of the significant issues is the future role of Fannie Mae and Freddie Mac,
as congressional lawmakers gear up for a major debate in 2010 over how to restructure
both home loan giants. "There is a potential for their role to be more limited,"
Chandan said.
The consensus: the government has given banks a good deal. "Every one is still waiting
to see how it will play out," said William Eckland, a partner with Sidley Austin
LLP in Washington DC. "It's been a tumultuous year," added Brian Olasov, managing
director of the Atlanta office of Mckenna Long & Aldridge, LLP. "Wall Street conceded
its authority on commercial real estate to Washington."
Interactive Workshops Provide Up to the Minute Info
Specific topics covered this year included Loan Recovery 101; Lender Landmines/
Liability; Doing Business with the Government; Exit Strategies; Challenges in Today's
Structured Environments; the State of Commercial Real Estate; and Special Challenges
and Solutions by Property.
While the commercial real estate news was grim, conference attendees remained enthusiastic
-- enjoying the camaraderie and feedback from industry professionals, among them
lenders, investors, servicers and attorneys. Said Maura O'Connor, a partner with
Seyfarth Shaw in Los Angeles, the event is "an exceptionally good venue for meeting
people in the special servicing/lending world. It also offers a great way to find
out what people involved in other aspects of the industry are seeing and doing under
the current market conditions."
The event is "outstanding...one of the best," said Eric Rohm, vice president/general
counsel of Babcock & Brown Residential.
Added Marc Schuster, president/CEO of Valhalla Financial, "this is the conference
for distressed asset management, this is my sixth year and I'll be back."
