Stalled Development Sites Could Be Worrisome

Dec. 23, 2008 - PRLog -- Commercial property foreclosures in the Central Florida area are almost negligible compared to residential foreclosures, according to longtime area real estate analyst George Livingston, chairman of NAI Realvest in Maitland.

“There are few commercial property foreclosures so far and most of them comprise small, stand-alone facilities that do not represent massive risk for lenders,” Livingston said.

Foreclosures on stalled development projects could be more worrisome, Livingston added.

“A few large-scale development projects in the area are under the microscope,” Livingston said.

“For the most part, they reflect the current turmoil in the financial markets and lack of demand, as well as poor development planning,” Livingston cautioned.

Livingston said troubled development deals fall into three main classes.

“Some developers partner with land owners or acquire an option on a development site,” he said. “In those cases, property taxes, insurance and maintenance costs are still a drain, but options costs help to limit a developer’s risk.”

Developers who borrowed capital to acquire sites outright in anticipation of additional loans to develop the property are the ones most at risk, Livingston explained.

“A lender will usually require interest payments, and while rates may be low the payments on a $5 million loan are substantial,” he said. “And maintenance, taxes and insurance are still due.”

“The least risk scenario is to pay cash for the land. That lets you delay development if need be,” he added.

For more information please contact:
George Livingston, Principal, NAI Realvest 407-875-9989 glivingston@realvest.com
Janice Paiano, Director of Marketing NAI Realvest jpaiano@realvest.com            
Larry Vershel or Beth Payan, Larry Vershel Communications, 407-644-4142

About NAI Realvest  

NAI Realvest in Orlando, covering all of Central Florida, is a fully integrated commercial real estate operating company specializing in brokerage, development, investment, leasing and management, consulting and research services in the U.S. and worldwide. NAI Global is an international commercial real estate network with over 325 offices spanning the globe.  Since 1978, clients have built businesses on the power of NAI Global’s expanding network.  Extensive services include multi-site acquisitions and dispositions, sublease, tenant representation, lease administration and audit, investment services, due diligence and related consulting and advisory services. To learn more, visit www.NAIRealvest.com.