Trepp: CMBS Loan Losses to Deepen in 2010
	Retail Receivership Opportunities Slow to Materialize
	Analysis: Why Blackstone’s Troubles Won’t Bruise Hilton’s Brand
	Office Rents Will Bottom Sooner Than Expected
	What Happens When Joint Ventures Come Under Stress?

Properties backed by CMBS loans that have had an appraisal reduction may be a financial fortune cookie for investors. Ordering an updated appraisal is just one of the steps required after a loan has been transferred to special servicing.

In the current environment, most appraisals have been reduced from their original value at securitization, especially loans underwritten during the CMBS boom. “Appraisal reduction is a forward-looking measure of potential future losses,” explains Paul Mancuso, a vice president with commercial real estate data and analytics firm Trepp LLC.

The New York-based researcher recently mined its database to extract all distressed CMBS loans that have had at least one appraisal reduction and still carried an unpaid loan balance through February 2010.

As commercial real estate distress continues to mount, dozens of retail real estate firms, including brokers, third-party managers and developers, are jockeying to get a piece of the business. But the assignments so far have been coming in dribs and drabs, not quite the tsunami of opportunities many of these firms had been expecting.

A combination of government recommendations to lenders to amend troubled loans whenever possible and banks’ inability or unwillingness to absorb potential losses, has led to inaction on assets with underwater loans.

That’s starting to thaw a bit, however, says Greg Maloney, CEO and president with Jones Lang LaSalle Retail, an Atlanta-based third-party property manager. Jones Lang LaSalle currently has 48 assets under receivership, including a mix of office buildings, retail centers and multifamily properties. That’s up from 10 properties at the end of 2008.

In no other segment of the commercial real estate industry is branding as important as it is in the hotel sector. But can a brand — even a household name with global reach and a long history of quality and integrity — be enough to overcome poor performance, financial distress and legal troubles?

That’s the test Hilton Hotels faces as it copes with a variety of well-publicized issues that don’t make for favorable headlines.

Two weeks ago, Hilton’s owner, The Blackstone Group, struck a deal to reshuffle the company’s debt load, cutting its obligation from $20 billion to $16 billion. To get the job done, Blackstone had to contribute $800 million to buy Hilton debt at a discount.

Despite the havoc that the past year wreaked on office rents and occupancies, the combination of limited supply growth and expected stabilization in the labor markets foreshadows a relatively quick return to positive rent growth.

This forecast implies that although the sales market for office properties has remained slow, a pickup in transaction volume and prices may occur swiftly.

After the office market peaked in 2007, the bubble deflated slowly through 2008 before the downturn gathered steam after the fall of Lehman Brothers.

When real estate assets undergo financial stress, property owners naturally focus on the relationship with the lender. What many owners in a joint venture fail to focus on at the earliest stages, however, is an equally important and complex set of relationships among the owners themselves.

Failure to sort out the internal issues inherent in these situations at the outset may lead to disaster. Putting one’s own house in order first, by contrast, will maximize the chance of a successful workout.

Most real estate assets are held in some form by a collective of members, often in the form of a limited liability company, a limited partnership, a general partnership or a corporation. Regardless of the form, the members have significantly different interests.