A large portion of the county’s developers--more than four dozen--will either have to renegotiate their debts with lenders or “be out of business by the end of 1991,” says a local consulting firm.
“Based on information that we have available, as well as what we hear from other executives in the real estate industry,” said Gary Wescombe, a consultant at Kenneth Leventhal & Co. in Newport Beach, “I think that numerous Orange County real estate firms--an estimate of 50 companies might be on the conservative side--will have to reorganize their finances to stay afloat over the next 12 months.”
Those developers face several problems: Bankers are making few real estate loans as federal bank regulators--anxious to avoid another mess like the savings and loan crisis--peer over the bankers’ shoulders.
Most types of commercial real estate developments are overbuilt in many markets around the country, including Orange County. And the tenants aren’t exactly scrambling to lease more space in the midst of a recession and a war.
That means, says Wescombe, that the industry won’t recover until next year at the earliest. And that could spell trouble for some of the county’s developers.
“Quite simply, due to the credit crunch and the soft real estate market, many companies are in such bad financial shape right now that, under current conditions and with their traditional loan structures, they cannot make it through the next 12 months,” said Wescombe.