What Does a Commercial Property Owner's Loan Modification Mean?

There are many signs of economic distress for commercial property owners within the current real estate market. Many experts say a second credit crisis that rivals the residential mortgage crisis is looming for the commercial property owners. All over the country commercial property owners loan modification or restructuring requests are on the rise.Ben Bernanke, Chairman of the Federal Reserve, recently told Congress that commercial real estate remains the greatest credit issue we have. The Congressional Oversight Panel, has reported their exception that approximately $1.4 trillion in commercial loans will be due for refinancing between now and 2013. With these predictions it would be wise that any business property landlord should be pro-active and take a look at their accounts, in particular those that will be coming due in the next few years and see if a commercial property owners loan modification program or loan restructuring plan would be beneficial.Who exactly is a commercial
property owner?Most of the time when the term commercial property owner is used, it refers to an individual or group of investors that form a legal corporation that own property and become landlords. Their tenants may be individual people, individual businesses or mixture. Typical commercial property landlords own, apartment buildings, restaurants, office buildings, warehouses, a business complex, shopping centers or other similar multi-tenant buildings.What kind of business relationship exists between landlord and tenant?The financial security of the landlord depends on the financial stability of their tenants. The best scenario is that their building is fully occupied, the rents high enough to make a profit, but reasonable enough to keep the tenants happy, and that they are paid on time. In times of financial stress, it is generally in the best interest of the landlord to work with the tenants, even through it means lessening their monthly income. As long as the tenants prove to b
e viable, with long term potential potential it is usually best to work with them.What would classify a commercial property owners loan modification?A commercial property loan modification means what it says, the terms of the loan are modified with a reduction or resetting of interest rates, some come of payment deferment for the past due amounts for a designated period of time, or in some special cases a lowering or readjustment of the principal. The goal is to allow a struggling business to bring down the mortgage installment payments to an affordable range.What Kind of hardship is needed for commercial property owners loan modification applications?Basically the acceptable financial hardships that commercial landlords need to be able to prove is loss of income due to vacancies in the building, a decrease in the rent income, a reduction in sales revenue, or ant losses of income due to concessions made to tenants to help them ride the financial storm.How do commercial loan lenders
and commercial property owners benefit?There is really a kind of symbiotic relationship between commercial loan lenders and commercial property owners. Loan modification usually allows both to gain from a successful business, and both can share in the risk when hardships arise. The bottom line is it is important to keep the business sector of any community, no matter how large or small viable. Commercial property owners loan modification programs will benefit everyone as widespread failure will disrupt local communities.

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