YLG Managing Troubled Assets
An Insider's View of Today's Market
Presented by ULI LA Young Leaders Group
Thursday, February 19, 2009
6:30 PM to 9:00 PM
Colliers International, Downtown
865 S. Figueroa St., Suite 3500
Los Angeles, CA, 90017
Speakers: Click the speaker's name below for bios.
• Sandy Throop, Director, Asset Management Babson Capital Management LLC
• Bernie S. Ocampo, Trimont Real Estate Advisors
• Susan Fowler McNally, Gilchrist & Rutter
• Fred Cordova, Colliers International
Recap
In an effort to educate members about current market dynamics, the ULI-LA Young Leaders Group hosted a panel discussion titled "Managing Troubled Assets" Thursday, February 19 at Colliers International. The panel was designed to take attendees through the process of dealing with distressed assets, from identifying problems to asset disposition.
The discussion moderator, Sandy Throop (Director of Asset Management, Babson Capital Management LLC) first gave a brief overview of the current state of the market, discussing topics such as the decline in transaction volume and paralysis in the credit market. Throop presented the group with a couple of startling numbers: $29 Billion in assets are troubled or in foreclosure and $87.9 Billion are at risk of foreclosure throughout the nation. Throop delineated the factors that led us to these high numbers, talking about low interest rates, the push for higher rates of homeownership, the relaxation of underwriting standards, and poor regulation implementation. In addition, he also pointed out the effects of this current atmosphere, such as stricter underwriting standards and the growing feeling that real estate is now considered a riskier investment than ever before.
After this introduction to the status of the market, Throop then engaged the panel, consisting of Bernie S. Ocampo (Trimont Real Estate Advisors), Susan Fowler McNally (Gilchrist & Rutter) and Fred Cordova (Colliers International). The panel guided the audience through the different phases of managing troubled assets. From a lender's perspective, this begins by looking at project solvency and constantly evaluating the loans in the bank's portfolio. From a borrower's perspective, this could entail working with tenants to assure they remain in the building. They also discussed the different avenues to pursue once an asset does become distressed, such as loan modifications. Ocampo emphasized that in order to receive cooperation from the lender, the borrower must show a strong commitment and "put more skin in the game" by taking on added risk as well.
McNally then broke down the two types of defaults: monetary or non-monetary and also the various forms of foreclosure, including judicial, non-judicial and deed in lieu.
Finally, Cordova advised the young professionals in the crowd to try and stay positive throughout this financial downturn. He emphasized the fact that opportunities will arise and that learning about the market in a down cycle is invaluable because experiencing a down cycle as a young professional will broaden the understanding of real estate market and provide tools that can be utilized in the next down cycle.
Event Recap written by Marissa Levi, YLG Communications Committee Member.
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