"'Zombie Buildings': Are They The Next Economic Calamity? "


"While the overall U.S. financial system is showing signs of stability, a rapidly rising tide of troubled loans for commercial real estate threatens the survival of hundreds of the nation's small and medium-sized banks.

Financial reports this month from federal regulators and industry analysts detail a new cycle of uncertainty that they fear could cripple the economic recovery. Billions of dollars in commercial debt will have to be paid back or refinanced at a time when property values have plummeted. About $500 billion will come due in 2010 alone and an equal amount every year through at least 2012, according to the Federal Reserve.



Many banks that cater to regional and community developments were largely unscathed by the residential mortgage meltdown. But now they are facing huge numbers of possible defaults by builders who erected thousands of office towers, condominiums and shopping centers with the easy credit available five years ago. With few tenants, those developments are turning into what industry insiders call zombie buildings.





WATCH: Huffington Post Investigative Fund's video report on the commercial real estate crisis:







Commercial real estate loans generally have terms of five to seven years. Many of the loans issued at the height of the credit bubble are coming due. By mid-November, $150 billion worth of commercial properties, about 7,500 in total, were in distress, according to Real Capital Analytics Research Inc.

Next year "looks like an unavoidable bloodbath for a multitude of 'zombie' borrowers, investors and lenders" and the shakeout could continue for "several years," says a recent report by PriceWaterhouseCoopers and the Urban Land Institute drawn from confidential interviews with industry experts.

Story continues below Stephen Blank, a principal researcher for the report, said that regional and smaller banks that made the loans are bracing for big losses that could overwhelm their resources.

"The number on the street - what we hear - is that as many as 400 banks might fail before this is over," Blank said in an interview.

As of mid-November, 123 banks had failed this year, largely split open by commercial debt. More than 400 banks now are on a problem list maintained by the Federal Deposit Insurance Corp.

Industry analysts, such as the Real Estate Roundtable trade group, point out that a sick commercial market hurts any hope for recovery. Local government revenues suffer. Construction jobs--and all sorts of ancillary jobs--disappear. Retirement funds are vulnerable.

In recent Capitol Hill testimony, Roundtable President Jeffrey D. DeBoer pointed out that "a growing number of Americans have a stake in commercial property" because of their investments in pension plans, 401(k) plans and direct investments in real estate investment trusts. He estimated that $160 billion of retirement savings are invested in commercial real estate.

In October, federal regulators issued a statement encouraging banks to work with borrowers to extend loans, rather than call them in. The federal government is also trying to entice investors to buy back bonds based on commercial mortgages through a government-run emergency fund aimed at salvaging the credit market.

Despite those efforts, the banks' problems are continuing to grow, said Michael Stevens, senior vice president for regulatory policy at the Conference of State Bank Supervisors.

"It's not the next big thing. It is the big thing," Stevens said. "We're dealing with it right now. We wouldn't be at 120 bank failures if we weren't seeing it now."




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View Comments: Newest First Oldest First HuffPost's Picks My Social Network Expand All Collapse All Page: 1 2 3 4 5 6 7 8 Next › Last » (15 pages total)
- + leduck I'm a Fan of leduck I'm a fan of this user 36 fans permalink OBAMA will get us through this mess...,
he has HOPE

Reply Favorite Flag as abusive Posted 02:20 PM on 11/20/2009 - + pumpupthevolume I'm a Fan of pumpupthevolume I'm a fan of this user 45 fans permalink The government shoulod seize those commerical building from the banks on behalf of the taxpayers, then have the corporations pay rent to the government and not the banks

Reply Favorite Flag as abusive Posted 02:19 PM on 11/20/2009 - + 31BlueDog I'm a Fan of 31BlueDog I'm a fan of this user 45 fans permalink seriously?

Reply Favorite Flag as abusive Posted 02:20 PM on 11/20/2009 - + Bzzzt I'm a Fan of Bzzzt I'm a fan of this user 39 fans permalink Apparently there are some slow-witted dullards hereabouts who think that cap and trade is a policy or something, rather than an implementation of a policy. How sad.

Reply Favorite Flag as abusive Posted 02:19 PM on 11/20/2009 - + amaycatbaker I'm a Fan of amaycatbaker I'm a fan of this user 23 fans permalink Getting Job creation is the key, BUSH Tax cuts expire at the end of next year. The rich wanted those, to get richer.

Why not get someone in Congress to RENEW these, with adding to it "If you want the cut make a job in America." Then it really won't be Obama raising taxes, it would be the wealth raising it on themselves.

The Republicans hate taxes and claim lowing it would stimulate the economy. Let them put their money where their mouths are, and give incentive.

Reply Favorite Flag as abusive Posted 02:18 PM on 11/20/2009 - + JeroenRitsema I'm a Fan of JeroenRitsema I'm a fan of this user 3 fans permalink The bankers, traders, and paperpushers are doing great, masturbating each other daily. Making profits while the rest of you can eat cake.

Or better yet, just continue waving your flag and sending kids to go fight illegal wars of aggression.

Notice the War ON terror has changed to the WAR of TERROR, ,,,,,,,,,,,,,on YOU AMERICANS>

Reply Favorite Flag as abusive Posted 02:18 PM on 11/20/2009 - + Coyote777 7 I'm a Fan of Coyote777 7 I'm a fan of this user 42 fans permalink masturbating is no longer a hotword?

Reply Favorite Flag as abusive Posted 02:19 PM on 11/20/2009 - + SuperBunny I'm a Fan of SuperBunny I'm a fan of this user 28 fans permalink Racist.

Reply Favorite Flag as abusive Posted 02:19 PM on 11/20/2009 - + Robeerst I'm a Fan of Robeerst I'm a fan of this user 3 fans permalink Signing NAFTA was a mistake.

Reply Favorite Flag as abusive Posted 02:17 PM on 11/20/2009 - + 31BlueDog I'm a Fan of 31BlueDog I'm a fan of this user 45 fans permalink You know it!

Reply Favorite Flag as abusive Posted 02:18 PM on 11/20/2009 - + ArthurCoyotereed I'm a Fan of ArthurCoyotereed I'm a fan of this user 8 fans permalink And you still know nothing.

Reply Favorite Flag as abusive Posted 02:19 PM on 11/20/2009 - + Coyote777 7 I'm a Fan of Coyote777 7 I'm a fan of this user 42 fans permalink here we go: American protectionsim is set to make this problem worse.

Reply Favorite Flag as abusive Posted 02:20 PM on 11/20/2009 - + leduck I'm a Fan of leduck I'm a fan of this user 36 fans permalink PEAK OIL will correct that mistake

Reply Favorite Flag as abusive Posted 02:19 PM on 11/20/2009 - + leduck I'm a Fan of leduck I'm a fan of this user 36 fans permalink I we have to do is WISH OUR PROBLEMS AWAY

Reply Favorite Flag as abusive Posted 02:17 PM on 11/20/2009 - + KewlJoJo I'm a Fan of KewlJoJo I'm a fan of this user 176 fans permalink Reagan aimed the Titanic at the iceberg. Bush I and Clinton kept her steady on course and she hit the thing while CaptDubya was on the poopdeck. We're sunk. It was nice knowing some of you.

Reply Favorite Flag as abusive Posted 02:16 PM on 11/20/2009 - + PerfectSense I'm a Fan of PerfectSense I'm a fan of this user 100 fans permalink The business cycle did not exist before Raygun? - interesting.

Reply Favorite Flag as abusive Posted 02:18 PM on 11/20/2009 - + cyrano1 I'm a Fan of cyrano1 I'm a fan of this user 83 fans permalink We're all culpable. Glass - Steagall vaporized under Clinton.

Reply Favorite Flag as abusive Posted 02:18 PM on 11/20/2009 - + biglimes I'm a Fan of biglimes I'm a fan of this user 71 fans permalink The band still plays.

Reply Favorite Flag as abusive Posted 02:18 PM on 11/20/2009 - + mheister I'm a Fan of mheister I'm a fan of this user 48 fans permalink We used to quote the Founding Father who said, "The price of freedom is eternal vigilance".

That needs to be amended just slightly.

Today, the price of freedom from corporate tyranny is eternal vigilance.

Reply Favorite Flag as abusive Posted 02:16 PM on 11/20/2009 - + GringoLingo I'm a Fan of GringoLingo I'm a fan of this user 180 fans permalink Have you ever gone to a city where the skyscrapers are obviously dated 1920s-30s and marveled at how beautiful they are? That's what future generations will be doing with these buildings. They will be put to good use in good time.

We've got plenty to worry about but we will make it through. The economy is going to take another dive because we're spending too much. Inflation is going to hit us sometime at the end of next year, and then we'll start to recover.

We've artificially tried to solve a problem that is best handled by nature. We have to let bad businesses fail. We have to allow hardship to hit us. We have to endure the bad times to get back to the good.

We cannot buy ourselves out of this. We need to save and pay off our debts so that we don't prolong a recession into a depression.""

Are we in the decline or downright fall of this American empire??
I think it's obvious when so many want to believe and follow idiots like Bush and Palin
like lemmings eager to run of the cliff to their fall on the rocks below...

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