Maura O’Connor Quoted in GlobeSt.com
“Industry: Beige Book is Optimistic”

Maura O’Connor was quoted in the July 31, 2009 GlobeSt.com article, “Industry: Beige Book is Optimistic.” The article discussed how the Federal Reserve Bank is optimistic according to its latest Commentary on Current Economic Conditions, also referred to as its Beige Book. According to the article, the Fed reported it was seeing “signs of stabilization” in some quarters of the economy, including residential real estate, but its prognosis for the commercial real estate market was mixed.

In the article, Maura contended that despite all the talk of green shoots and economic improvement, it is likely that commercial real estate (CRE) will suffer for a significant amount of time. According to Maura, “There is nothing to increase demand: the continuing high rate of unemployment, and the fact that so many people overleveraged themselves through home equity extraction (and must either repay that money or have their houses foreclosed upon) means that consumer demand, which drives our economy, is way down."

She further noted that the freeze of the CMBS market has wiped out about 40% of the financing capacity that was used to fund CRE. That means that over the next few years, unless an alternative source of funding is found, many CRE projects will be subject to maturity defaults. She commented, “I expect to see a lot more defaults, workouts and foreclosures--especially as the banks move toward recovery because of the massive federal bailout, which will improve their capital reserves and will allow them to move forward to recognize their losses and foreclose on their troubled CRE loans slowly over time.”

Maura concluded, “Based on what I'm seeing, CRE has not yet absorbed the brunt of the recession, and will likely continue to get worse over the next couple of years, until much of the CRE market has been significantly repriced downward.”