“With more and more distressed commercial real estate assets expected to come on stream as a result of serious liquidity and other problems, the need for superior real estate management, marketing, and leasing skills — and a proven record of performance — will become increasingly and acutely apparent,” said IREM® President Pamela W. Monroe, CPM®. “Our nation’s economic viability requires real estate management professionals with top-notch credentials to inject value back into distressed properties by protecting income streams, controlling expenses, positioning and/or repositioning them to deliver the best possible ROI and, ultimately, to command the best possible price when they are sold.
“Indeed,” Monroe added, “highly skilled real estate managers, by virtue of their professional education and experience, know how to deal with properties in transition as well as the formidable challenges of a down economy. Simply stated, they know how to salvage, maintain, reshape, and remarket what is expected to be an enormous pool of troubled real estate assets.”
Monroe reports that IREM recently convened a group of some of its volunteer leaders who experienced the real estate market turmoil of late 1980s and early 1990s and asked them to share their observations relative to today’s financial crisis. Here are some of their thoughts:
- The culprit that triggered the S&L crisis of the early 1990s was overbuilding; too much supply; not enough demand.
- Today’s culprit is excessive leverage and unrealistic appreciation expectations.
- While real estate is cyclical, not all property types are at the same place in the cycle at the same time. One property type may be doing well while another may be suffering from overbuilding.
- The starting point for managers when dealing with distressed properties, no matter what the circumstances, is to analyze them for best use — this could mean short- or longer-term — based on the owner’s goals.
- Advice should be property specific and location specific.
- The end product of comprehensive research and analysis should be a management plan that carefully details all aspects of the property and includes an analysis of marketplace dynamics; identification of the property’s problems and challenges; identification and analysis of possible solutions; and, finally, a recommended solution that reflects the owner’s goals.
- The “devil is in the details” and thinking “out-of-the-box” is essential.
“IREM believes in the power of knowledge and the importance of sharing it,” said Monroe. “So the organization has identified distressed property member experts for each key property sector. These experts will serve as information resources for the IREM membership community and the industry at large.”