Commercial Property Herald

Are Insurers Going to Take the Lead on Commercial Real Estate Lending?

The Wall Street Journal writes that in Europe, insurers are influencing terms and making credit both easier and cheaper.

I can recall in the 90's do a great deal of post-foreclosure work for some of the larger insurance companies that had made numerous commercial loans earlier in the decade and in the 80's.  If my recollection serves me correctly, at this time, before the CMBS market, insurance companies were a very significant source of finance for the commercial real estate market. 

Is it possible that insurers are coming back to the market and to how influential will they be?

How will the Debt Ceiling Debate Effect Commercial Real Estate

With all the hullabaloo and politcal rangling over the issue of raising the United State's debt ceiling over the last few weeks, I have been contemplating how those in commercial real estate will be effected. On July 29th, Globe Street Reports that Goldman Sachs and Citigroup have pulled a 1.5 Billion CMBS offering this week., has partly answered my question.  Higher interest rates, less availability of money and perhaps a slow down of the recent uptick in the commercial sales that we have been seeing lately.  Over the next few posts, I will be setting out some of my thoughts and the thoughts of others on this issue.

California Appeals Court Rules Oral Promises Are Binding

A recent California appeals court ruling found that an oral promise by a lender to modify a loan is enforceable, by the borrower.
California Appeals Court Rules Oral Promises Are Binding.

To an experienced lawyer, a recent court ruling in California finding that an oral promise to modify a loan can be enforceable even when the loan documents require a writing to modify the loan, is not new or surprising law and is nothing more than what we learned in law school.  What us lawyers would refer to as "Hornbook Law." We know this defense as "Promissory Estoppe and can be raised as a defense in almost any contract dispute, not just loans. The defense arises when one party reasonably relies upon, to their own prejudice or harm, the person making the promise may be bound by their oral promise. 

There are some difficulties in the defense, not the least of which is proving that the promise was actually made, that the promisee reasonably relied upon the promise and that the promise relied upon the promise to their prejudice.

Why Close the Bank, Just Bail it Out.

Carrie Bay writes in DS News Regulators Shut Down Four Banks, about the recent spate of closures by the FDIC of community banks including shutting down La Jolla Bank FSB. According to Carrie:

"The FDIC brokered a deal with OneWest Bank in Pasadena to take over La Jolla Bank’s $2.8 billion in deposits and reopen its ten branches. One West, which was formed to take over IndyMac Bank when it collapsed, also agreed to purchase “essentially all” of the La Jolla Bank’s $3.6 billion in assets, $3.3 billion of which the FDIC agreed to share losses on. The California bank’s failure is expected to cost the FDIC $882.3 million."

This deal follows on the heels of questions raised about the deal brokered by the FDIC when One West Bank took over Indy Mac Bank and One West Banks most recent profit disclosures.

All of this raises the question, what would happen if the FDIC didn't close the community banks holding the toxic loans and instead, simply shared the losses with the failing banks?  What if, in the case of La Jolla Bank, the FDIC just agreed to share the losses with the bank, expecting to lose $882.3 million?