Still waiting for the bottom?

We're getting ready for the June issue of Midwest Real Estate News. As we put the issue together, I've interviewed several commercial real estate pros across the Midwest, and I always make sure to ask their opinion on whether they're seeing any signs of a rebound in the commercial real estate industry.

So far, commercial real estate pros have suggested that there may be a glimmer or two of hope out there. But for the most part, they say, business is still incredibly slow. The big problem, of course, is financing. It's a huge struggle, still, to get any.

James McShane, chief executive officer of Rosemont, Ill.-based The McShane Companies, summed it up this way for me:

"The good news is that we are not overbuilt in most categories. The bad news is that the economy is still not growing. There just is no need for a lot of new construction. We think that the spiral will come to a stop some time in the fourth quarter. But we are all interested in seeing what will be the first industries to come out of this recession."

There is a lot of uncertainty out there in commercial real estate. And it doesn't look to be going away any time soon.

An innovative solution to cash-flow difficulties

We have some pretty smart people write for Midwest Real Estate News, Illinois Real Estate Journal and Minnesota Real Estate Journal, commerical pros who really understand the ins and outs of the challenging commerical real estate business.

Our columnists are one of our greatest assets. The information they provide can be invaluable.

William Cotter, a partner with the law firm of Coman & Anderson, PC, in Lisle, Ill., is one of these commercial industry experts. You can check out his column on the power of master leases on the REJournals.com Web site.

A master lease is a creative tool that owners can use to help shore up a cash-flow shortfall at their commerical projects. It's a complicated issue, and one that I can't do justice to in a blog post, but here is an excerpt from Cotter's column that explains it better than I can:

"In general terms, the master lease is simply a lease of all or some portion of a commercial project by a creditworthy 'master tenant.' This legal structure provides supplemental or secondary rent stream for the project. The master tenant will usually be the project owner, or an affiliate of the project owner (for example, a member in the owning LLC, or a subsidiary company). The obligations under a master lease are assigned to the lender as collateral."

Master leases can be used in a couple of ways. Property owners seeking to finance a commercial project, always a struggle these days, can use the master lease as a credit enhancement. Property owners can also use the master lease as a financial inducement to a buyer.

Like I said, Cotter explains it in far more detail. Check out his column: A master lease might be a tool that you can use.