The elephant in the room

What cliché should I use to describe the current situation with commercial real estate?

"Waiting for the next shoe to drop"; or "The elephant in the room"? I prefer the later whose definition is: an obvious truth that is being ignored or goes unaddressed.

While commentators have started to discuss the potential problems down the road for commercial real estate, as yet these problems do not seem to have been seriously addressed. The regulators did perform rigorous stress tests, but they only looked out two years to 2011, while the major problems with commercial real estate loan maturities are beginning now and will continue out to 2017.

To date commercial real estate prices have fallen by 25-30% from their peak in 2007, mainly due to the crisis in the credit markets, and it is becoming clear that there is an additional 15-20% drop on the way due to the recession and the consequential impact on property cash flows. Not one to dwell on bad news, I point all this out for the tremendous opportunities the next couple of years will present.

Mulcahy Capital has stayed in close contact with all our lenders and clients throughout this developing crisis and it does appear that we are at the tip of the iceberg and problem loans are only beginning to be acknowledged. We have been working with lenders and borrowers helping them through workout situations, refinancing notes, and raising fresh equity, and we will continue to do so over the next few years as these problems continue. Do not hesitate to contact me if you need help with a situation, you are looking for an opportunity, or you just need financing.