Marel Q1 2024 Investor Presentation from May 8, 2024
Ra law group
1. RISING LOAN DELINQUENCIES KEEP LOCAL REAL ESTATE SPECIALIST BUSY
Commercial Property in Los Angeles Hardest Hit
Los Angeles real estate specialist RA Law Group, who regularly handles commercial loan workouts,
expects to be kept busy in 2011 as loan delinquencies on commercial and other real estate loans
continue to rise in Los Angeles and throughout California and the nation.
Los Angeles real estate specialist explained that, according to financial data analyzed by RA Law Group
from the Federal Deposit Insurance Corporation, delinquencies increased in all real estate and
commercial loan categories. In Los Angeles and surrounding counties, 8.31% of all real estate loans,
4.84% of all commercial real estate loans and 29.00% of all construction and development loans were
delinquent or otherwise in default for non-payment for 90 days or more.
2. While Los Angeles and surrounding counties were hardest hit by loan defaults and delinquencies, other
areas of California fared little better in 2010. San Francisco and San Diego also experienced historically
high loan default rates in 2010.
Los Angeles real estate specialist attributes the substantial increase in commercial loan defaults to rising
vacancy rates, increased rental concessions and falling rental rates, and increased operating expenses
(including taxes and insurance). They commented “With these types of negative pressures on the
market, it is understandable that we will see more and more borrowers who are having difficulty
meeting their mortgage obligations.”
Until 2010, lenders were generally patient with borrowers in prime locations. With strong occupancy
rates and stable rental rates, lenders could afford to modify loan terms and extend maturity dates.
However, commercial loans originated during the height of the real estate market from 2005 to 2007
are now reaching maturity. These loans often included over optimistic valuations based on then market
conditions. Since then, the commercial market has experienced declines from 25% to 50% depending
on asset class. Lenders are for a variety of reasons declining to renew these loans.
“Even borrowers current on their loans are increasingly finding it difficult to refinance their loans or to
sell their properties in order to meet loan repayment terms as mortgages mature and become due”
reported real estate specialist. They attributes this change in approach by lender to several reasons –
changes in loan underwriting standards, declines in the commercial real estate market and banks
attempting to diversify from and reduce their exposure to the commercial real estate markets.
Between 2010 and 2014, $1.34 trillion in commercial real estate loans will be maturing. In nearly 50% of
these cases, the borrower owes more on the maturing loans than the property is currently worth. While
lenders in some areas of California haven’t been under pressure to dispose of non-performing loans, this
trend appears to be changing. Lenders now appear to be focused on “cleansing” their loan portfolios of
non-performing loans. “Given the number of loans maturing in and after 2011, this trend will likely
accelerate,” comment real estate specialist.
3. Los Angeles real estate specialist recommends borrowers with commercial real estate loans maturing in
2011 and 2012 to seek legal counsel now emphasizing that “borrowers need professional assistance
when negotiating commercial loan workouts.” They explained that the “negotiation of commercial loan
workouts require debtors to show a viable plan for the disposition of the property as well as the ability
of the borrowers to repay the loan under the new terms.” Often, this negotiation requires the
disclosure and exchange of financial information. Further cautioned that “the information necessary to
secure forbearance or other workout agreement is the same information that could be used against the
borrower in lawsuits to collect deficiencies” and, therefore, “professional assistance should be obtained
to determine when and how this highly sensitive information should be disclosed to the lender.”
For more information on commercial loan workouts, contact Los Angeles real estate specialist at Ra Law
Group at 888-LAW-3111.