From John Johnson, CCIM - Atlanta, GA | This is a good video which clearly explains the tremendous run-up of CRE prices over the past few years.
From Atlanta’s CityBiz Real Estate:
Leo Wells, founder and president of Wells Real Estate Funds, spoke to members of the honorary board of the Real Estate Department at Georgia State University this week, about how the presumption of perpetual prosperity has landed many businesses in trouble today. Members of the board are among the leaders in commercial real estate in Atlanta.
Wells’ view is that excessive debt is the primary culprit in the current commercial real estate woes and that property owners got overextended because they presumed to know the future.
Despite this situation the “fire sale” of properties at greatly discounted rates that many in the industry anticipated has not materialized, as many lenders have chosen to extend loans on troubled assets. Prices for commercial real estate have remained relatively stable for core assets as demand has outstripped the limited supply of these properties.
In 2009, Mr. Wells was elected to the Board of Governors for the National Association of Real Estate Investment Trusts. Also in 2009, the Southeastern Chapter of the Real Estate Investment Advisory Council inducted Mr. Wells into its Hall of Distinction at Georgia State University.
Quotes: Leo Wells
“Our current economic predicament is largely a result of the fact that many people presumed to know the future,” said Leo Wells. “Many in commercial real estate assumed tremendous debt because they thought rents would perpetually increase and demand would always remain high. Our industry’s debt problem is really a ‘presumption problem.’”
“This recession has hopefully reminded us of the dangers of excessive debt, and the risk we assume when we presume that economic growth and prosperity are perpetually assured.”
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Tags: assets, CCIM, commercial, Commercial Real Estate, debt, investment trusts, John Johnson, Leo Wells, loans, overextended, properties, troubled assets