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FINANCE, REAL ESTATE LEADERS ANTICIPATE CONTINUED MARKET SLOWDOWN

Annual Trigild Lender Conference Attracts Record Breaking Crowd

SAN DIEGO, CA -- A line up of prominent finance and commercial real estate leaders addressed today's volatile economic climate at the eighth annual Trigild Lender Conference, and came to a common consensus: the worst is yet to come. Most agreed that the situation will not start to improve until the first quarter of 2010.

Experts at the event named the credit crunch as the primary culprit in the commercial and residential real estate meltdown, as a record breaking crowd of leaders in the finance, legal and real estate industries convened in downtown San Diego for the annual event, held Oct. 22-24.

Until the credit markets ease, the economy will be extraordinarily strained, said keynote speaker Sam Chandan, Ph.D., chief economist and senior vice president of research for New York City-based Reis Inc. Constraints on credit diminish consumer's capacity to spend, which affects all industries, he added.

Not surprisingly, the fundamental contributor to the dire situation is the residential housing slump. We simply built too many housing units, and this problem is not going away, said Portland, Ore.-based William Conerly, Ph.D., also a keynote speaker and principal of Conerly Consulting LLC and chief economist of abcInvesting.com.

Fueled by soaring home values, consumers went on a spending spree, which has come to a veritable halt, he said. Add to the mix, a loss of consumer confidence and a tight lending market: you have a full blow recession, said Conerly.

Banks do not make bad loans in bad times, only in good times, Conerly pointed out. And these days, banks aren't even making good loans. Even though the Fed is doling out money, banks are nervous, as half of the assets in the whole banking system are real estate related. The final outcome remains to be seen. It's still a mystery, said Conerly. We don't know how much bank sheets have been compromised by all this.

Tough Times on Horizon for Commercial Real Estate

While commercial real estate has not been overbuilt like residential, there are big problems in this arena as well. The system is fragile, said panelist Clark Rogers, senior vice president of KeyBank Real Estate Capital in Kansas City, Mo., especially when you add on lax oversight which created the situation.

Commercial real estate debt is at an historic high, said Chandan, whose company provides commercial real estate performance information and analysis. This is primarily due to the fact that many commercial loans were based on inflated earnings which turned out to be too optimistic," said panelist Bill Hoffman, president of San Diego-based Trigild.

There is just no exit strategy for these bad loans, and no way to address the rising tide of delinquencies and defaults. Because of the difficulty in obtaining financing, more and more projects are coming out of the pipeline, said Chandan.

Banks will continue to face challenges in extending credit, fueled by obstacles from recent years' growth in commercial real estate exposure, reduced profitability in commercial portfolios on higher delinquency management costs and spillovers from residential mortgages.

The bottom line Standards are much tighter than they were in the boom, and credit markets must ease to facilitate an orderly process of deleveraging and refinancing.

Commercial transactions will be muted through the end of the year and pricing will fall further, as overleveraged borrowers sell assets under duress, Chandan said. In the meantime, we will see short-term loans coming to maturity, which will be difficult, and in some cases impossible, to refinance, Hoffman added. The offsetting impact of lower risk free rates has absolutely run its course.

The conference also featured a roster of well-known speakers and panelists discussing recovery options, intercreditor issues, sale and recovery, pricing assets realistically, problem loan areas, forecasts by property type, and the Fed's Troubled Asset Relief Program (TARP). For information on the conference, visit www.trigildlenderconference.com.

About Trigild

Headquartered in San Diego, Trigild has more than 30 years of expertise in managing a wide array of commercial real estate assets and operating businesses. Specializing in turnaround management, repositioning of troubled properties and non-performing commercial loans, Trigild combines receivership, operations management and disposition services under one roof. For information, visit www.trigild.com.