Pathfinder Partners, LLC, a San Diego-based fund manager that acquires distressed commercial real estate loans and real estate from financial institutions, announced today that it has launched Pathfinder R3 ™— a new rescue financing program designed to provide much-needed capital to under-capitalized real estate owners.
According to Pathfinder’s senior managing director, Mitch Siegler, R3 ™ signifies “restructuring, repositioning and rescue financing.” To that end, he said, “the program’s goal is to help real estate owners and investors — hit hard by frozen debt markets and plummeting commercial real estate (CRE) values — repurchase or restructure bank loans and reposition projects in need of capital.”
“Despite glimmers of hope in the economy, we are in the early innings of a multi-year CRE crisis,” Siegler said. U.S. bank lending is at an all time low, plummeting by nearly $300 billion in 2009 alone, according to a recent report by the FDIC. Fueling the problem, commercial property values are down 41.6% from just two years ago, according to Moody’s/Real Commercial Property Price Indices. Additionally, Northmarq estimates that more than 11% of $536 billion of CMBS loans will be at least 60 days past due by year’s end.
“We are getting more and more calls from borrowers who are upside down and simply can’t refinance their loans or secure funding for tenant improvements and leasing commissions for new leases,” Siegler explained. In fact, a February 2010 report by the Congressional Oversight Panel on the Troubled Asset Relief Program warns that $1.4 trillion of CRE loans will mature between 2010 and 2014 and that 50% are already “underwater”— worth less than the mortgage.
“Our new Pathfinder R3 ™ program will enable troubled borrowers to restructure, modify or repurchase CRE loans and will provide bridge financing or equity to reposition under-capitalized projects.”
Siegler believes Pathfinder R3 ™ is among the first of such offerings in the market, but expects such programs to grow, given the large volume of loans which will be maturing over the next few years.
In addition to providing capital, the Pathfinder team, which has participated in more than $20 billion of CRE transactions and includes seasoned real estate investment analysts, attorneys and financial/restructuring experts, is poised to help restructure troubled projects and assist with complex deal structures and tax strategies.