LB Commercial Realty LLC is an active force in the selling, leasing and management of commercial, industrial/warehouse and investment real estate. For financial institutions, the ultimate impact of the commercial real estate whole loan problem will fall disproportionately on smaller regional and community banks that have higher concentrations of, and exposure to, such loans than larger national or money center banks.
But some aspects of the structure of the commercial real estate markets, including the heavy reliance on CMBS (themselves backed in some cases by CDS) and the fact that at least one of the nation’s largest financial institutions holds a substantial portfolio of problem loans, mean that the potential for a larger impact is also present.
In areas where the amount of new construction is either limited by land or law, commercial real estate can have impressive returns and considerable monthly cash flow Industrial buildings generally rent at a lower rate, though they also have lower overhead costs compared to an office tower.
Commercial real estate REITs hold a portfolio of properties (as a mutual fund holds stocks or bonds ), but are publicly traded; this makes them easy to buy and sell, providing liquidity in a field that is notoriously illiquid The managers of REITs handle all the details of purchase, maintenance, tenants, and so on. They also receive special tax considerations and typically offer investors high yields ; they can be geared towards providing income , capital appreciation or both.
Those difficulties can weigh heavily on depository institutions, particularly mid-size and community banks that hold a greater amount of commercial real estate mortgages relative to total size than larger institutions, and have – especially in the case of community banks – far less margin for error.