By Erica Leatham

In this final installment of my economic observations, I am pulling from the comments of some local businesswomen.

CREW DC has a wonderful program called CREW CEO in which they bring in local real estate leaders for an intimate conversation about various topics – this year the series began with a program about development (full disclosure, I was one of the speakers, along with Kathleen Webb from JBG) went through leasing and negotiating and ended with a program on Finance and Distressed Assets last week.

The speakers included Monique Holland, VP/Senior Asset Manager with CW Capital Asset Management, Bari Nichols, SVP Lincoln Property Company and Natalie Wilensky, President Wilenco Real Estate Restructuring.

Although their economic outlook was as depressing as the previous ones, at least they had some solutions to keep busy during the down time (which would be now until 2011):

• Private equity will be circling around companies in Chapter 11 and once they see enough of a discount, we will see activity start to pick up.
• Bankruptcy is not always a good option to maximize value, but some companies use it to halt a foreclosure.  The problem is that there is no financing to get through the bankruptcy and, therefore, you see a lot of liquidations (there are big bankruptcy issues as a result of the decision in the General Growth Properties case, but that’s a different discussion!)
• Workouts are extraordinarily complicated, as opposed to the last recession, because of the CMBS structure, so, if you are doing work like Monique, you are very busy
• If you are trying to workout a loan directly with a lender, be prepared to put up some equity; some banks will just extend the loan hoping for a better day in three years, but about half are going to foreclosure
• If you have the cash (or represent someone with cash), there is land out there at a good price

By Erica Leatham

(I promise, Part 3 will follow in a more timely fashion than Part 2 followed Part 1!)

On the final day of the CREW Convention, Marci Rossell gave a more upbeat take on the economy than the speakers the previous day.  I say “upbeat” rather than “optimistic” because she had a lot of energy when she delivered the bad news:  Commercial Real Estate is nowhere near a recovery.  Good to know.  What else?

• This recession is not unique:  they all start with a credit crunch (it began two years ago in the short term markets), head to a financial crisis and end with a resolution.
• Marci thinks we are entering the Resolution phase.  Right now the government is “spraying money” all over the place as part of the Resolution; she thinks this is a short term solution and the Fed needs to turn off the faucet.
• The credit markets completely shut down after the Lehman failure because the banks were afraid to lend after the government changed the rules without notice (since everyone thought Lehman was too big to fail).
• About six weeks ago, the commercial paper market became stable and, therefore, credit is starting to move and the recovery is beginning
• However, although credit is moving overall, it is not moving in the commercial real estate market and this market will be the last to see the credit thaw because the banks have to work through all their existing write-offs
• Unemployment numbers are not going to improve anytime soon
• Emerging markets are not suffering through a recession, so there is a demand for American products and GDP should begin to improve.

She was a great speaker, I wish I could give you more of a flavor of her talk -  check out the link to Marci and you can watch a video of a similar presentation (though its a little outdated).

By Erica Leatham

I haven’t had a chance to post comments from the other economic commentators at the CREW conference, but Steven Pearlstein’s commentary in the Post today was right on point with what Drs. Wheaton and Riddiough discussed.