Robert Pliska

Going From Mark-To-Market to Mark-To-Make Believe!

By Robert Pliska

Have we gone from "mark-to-market" to "mark-to-make believe"? The FDIC just released its policy statement - Prudent Commercial Real Estate Loan Workouts. The FDIC's purpose is provide transparency and consistency to commercial real estate workout transactions and not curtail the availability of credit to sound borrowers. While the FDIC's intentions are honorable, the policy may provide the opposite effect - lack of transparency and consistency and extending the lack of credit to sound borrowers.

The key point of this policy statement is - loan workouts need to be designed to help ensure that the institution maximizes its recovery potential. Renewed or restructured loans to borrowers who have the ability to pay their debts under reasonable modified terms will not be subject to adverse classification solely because the value of the underlying collateral has declined to an amount that is less than the loan balance. So if the borrower and/or its guarantors can still make the payment and the financial institution would prefer to extend the loan rather than take a loss, the fact that the property is worth less is not the determining factor.

The loan can be in good standing if the borrower/guarantor can show that they can still make payments. New appraisals need not be ordered if an internal review by the institution appropriately updates the original appraisal assumptions to reflect the current market and provides an estimate of the fair value for impairment analysis. Documentation should demonstrate a full understanding of the property's current "as is" condition. However, if the institution intends to work with the borrower to get a property to "as stabilized" market value, then the institution can consider the "as stabilized value" in its collateral assessment for credit risk rating. This seems to be heading far to the "make believe" area. Just present a "good story" and the institution can buy a lot of time.

This "good story" accounting will provide more of a lack of transparency and consistency. Two people, for example, can tell a "good story" much differently. It will probably make the FDIC's job more difficult. In the 1990's, for example, banks in Japan were allowed to avoid taking losses and write-downs. The result was an entire decade of stagnation. The steps by the FDIC could create a parallel situation. This may extend the time of lack of credit to borrowers. Let's get back to reality rather than "make believe". Hopefully, our commercial real estate problems may be resolved sooner. For further discuss ion of this topic, feel free to contact the author Robert Pliska, CRE, CPA.

Be Positive and Opportunistic!

In commercial and residential real estate like other areas of business, there are many reasons to be negative. Yet, there are ways which we can be positive and opportunistic! This short short 2 minute video may be of assistance to brighten your day! Have a little faith! Be Positive and Opportunistic

The Counselors of Real Estate - A Capstone of Professional Achievement

By: Robert Pliska

The Counselors of Real Estate is an exclusive membership organization whose CRE designation is a capstone of professional achievement. Only 1,100 real estate advisors worldwide are entitled to display the CRE designation after their names. Membership is extended by invitation only. The web site for the Counselors of Real Estate is www.cre.org. As a matter of clarification, the web site www.cre-advice.com is not affiliated with the Counselors.

To be considered a Counselor of Real Estate, real estate advisors must be recognized by their peers, clients, employers and the marketplace for the scope of their professional expertise, acknowledged leadership, impeccable judgment and unwavering integrity. Counselors of Real Estate stand together as the preeminent thought leaders in the industry. In addition, they are linked to one another by their commitment to the organization's core values of integrity, competence, community, trust and selflessness.

Since its inception in 1953, the vision of the Counselors of Real Estate has been to develop a membership recognized for its expertise and excellence. The rigorous membership invitation process has maintained this organizational vision for more than 50 years. Applicants must hold a senior position in a firm or company. Applicants must be recognized for excellence as an advisor and must be highly regarded for their integrity, judgment and knowledge. Applicants must have practical experience in real estate for a substantial number of years, three of which must be in real estate counseling.

Today's real estate market demands professionals such as a Counselors of Real Estate who have the core values of integrity, competence, community, trust and selflessness. Professionals are needed who have the depth of knowledge, technical competency, unbiased analysis, critical inquiry and trust to cope with the very difficult situations currently present in the real estate industry. The Counselors' purpose is to provide objective guidance that achieves results in the best interests of a client or employer.

For further information and membership requirements on the Counselors of Real Estate, please visit their web site www.cre.org or the author of this article Robert Pliska, a Counselor of Real Estate. As previously noted, the web site www.cre-advice.com is not affiliated with the Counselors of Real Estate. This site has its own extensive membership requirements. "CRE" in this connotation represents "commercial real estate" and not the Counselors of Real Estate.

Successfully navigating the down market can be achieved by a good business model. Commercial and investment real estate is still a business. Review the six pillars of a good business model and how it relates to helping navigate the current down market. This short one minute video explains and may be helpful - http://www.motionbox.com/videos/7a9edab41e1ae3c1f5?type=sd For further information feel free to call for Commercial andInvestment Real Estate advice!

There are opportunities in distressed properties. Review of this article may be of assistance to you. http://www.cre-advice.com/blog/foreclosure-fortunes/ Feel free to call Robert Pliska for opportunities in the local or national area.