It’s not easy to build business in a down year. Ask any commercial real estate developer or broker in the Midwest. But commercial real estate professionals do have allies in their efforts to nab new business, the commercial real estate attorneys working in cities across the region.
Midwest Real Estate News recently spoke to four of these commercial real estate specialists about the challenges that their real estate clients are facing as 2011 moves into its second half. You can read the full story, and interviews with all four attorneys, in our June issue. Here, though, is a sample, our interview with Minneapolis-based commercial real estate attorney Mary Ranum.
Mary Ranum, chair of the real estate group at Fredrikson & Byron Minneapolis
The downward pull of a weak housing market: Our housing developer clients are dealing with a weak housing market and slow sales in their communities. They are trying to work on continuing to have viable operations when the market is as slow as it is. We are working with them, as we are with many of our clients, to negotiate modifications to agreements with land sellers. We are working with them on negotiating concessions and moratoriums with lenders. The whole housing market is slow. We are dealing with all manner of workouts, amendments and modifications. We have some housing clients we had three or four years ago who are no longer in business. They didn’t make it through this most recent downturn.
Hope: With commercial development, there is a little bit of activity. There is a little bit of activity in the medical/office building area, especially, with some build-to-suit projects. There is a little bit of other types of development going on, too. Of course, it’s not near the level of activity we saw before the downturn, but there has been a slight increase in activity.
Troubled loans: We continue to do work for lenders who working through troubled loans. We continue to do a lot of work with foreclosures and workouts. We are starting to see some activity by investors and investment funds looking to purchase distressed assets at a low price. They are trying to make something of those distressed assets. With the low price, they find that they can now get into those assets.
Widespread pain: We do have a wide range of clients. My colleagues and I represent all sectors of the real estate industry. It’s a different story for different sectors, but everyone has experienced the slowdown and has made significant adjustments because of it. No matter how they touch the industry, they have suffered from the slowdown. No housing rescue: I remember when this whole crisis began. There were pundits who were theorizing that three or four years later the housing market would lead us back out. That’s certainly not been the case. We haven’t worked our way through the foreclosure inventory that is out there. There are so many homes on market, there is little reason for developers to be building new ones. We have some clients who are in the office warehouse, industrial and commercial areas that are doing a little bit of activity. This activity is driven by very strong fundamentals with a committed user. There is very little spec building going on, of course. It is a committed tenant or owner who might need a new facility or new space that might lead a developer to do something new.
The strong survive: There are the few companies that continue to grow. We have a restaurant client that has continued to add new stores throughout the downturn. We have a large retail client that has continued to grow. There are a few companies who continue to add new retail or new locations because they have weathered the downturn very well. We are very happy to have those companies as clients. They have either the right product mix or the right price point to continue to do well.