Commercial Real Estate Foreclosure Prevention

Continued from the Commercial Real Estate Foreclosure Main Page.

The obvious remedy for commercial real estate foreclosure is prevention.  The key issues that have been discussed that require workable remedies are:

  • Technical Defaults.  These are the easiest things to miss and a proactive monitoring solution for the maintenance of all of the covenants of the aggregate of outstanding securities is a must.  The INVIZEN RTS system provides the basis for monitoring: (1) financial ratios maintenance; and (2) licensure maintenance; and (3) payment of ad valorem taxes; and (4) payment of insurance premiums; and (5) maintenance of insurance policies; and (6) payment of employee benefits and withholdings; and (7) filing of required financial and business operations reports; and (8) payment of routine operating expenses.  This is a workable solution for helping prevent administrative foreclosures.
  • Market Disruptions.  By their definition, market disruptions are impossible to predict as they are brought on by technological advances that play out in terms of the purchasing preferences of consumers.  The changes in purchasing preferences are the key to managing the impact of market disruptions in the CRE vertical because; historically, these changes do not manifest themselves overnight.  They take time and the INVIZEN RTS system provides the basis for understanding their potential impact and using that time period where consumer purchasing preferences have changed to a degree where it becomes likely the result could impair the asset, to provide advance warning so the assets can be re-positioned, exchanged or an orderly exit contrived before the future asset value impairment potential can become a present loss severity risk issue.  On the other hand, the RTS can also tell us when it may be time for early profit-taking due to the fact that market conditions and/or the financial results of operations have yielded results that warrant consideration of an early sale or complete re-capitalization.
  • Future Value.  The future value of the income stream a commercial real estate property can generate is the only basis for investment and lending.  While a given asset class may produce a marketable return today, it may in fact not be the intended-use that would provide the greatest potential economic return.  This is also a common source of defaults because it goes hand-in-hand with the impact of market disruptions.  The INVIZEN RTS system runs up to 24 (currently) intended-use scenarios on a given site and market each month the property is being monitored and provides alternative use reports and feasibility analysis forecasts for management and investment consideration to help ensure the profit stream potential of the property is being constructed on the most efficient basis potential.

The issues are clear and you can learn more about these potential remedies by talking to an INVIZEN representative today at 832.663.9634.