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Trigild Makes a Move to Bigger Quarters

Loan distress plays a relatively limited role in San Diego County’s commercial real estate market, but there’s enough of it still happening nationally to keep firms such as Trigild busy and growing for the foreseeable future.

The San Diego-based company recently moved from the Del Mar Heights area to new and larger quarters in the Golden Triangle/University Towne Center neighborhood.

“We had built out our office in the old place by taking up some neighboring offices,” said Trigild President and CEO Bill Hoffman. “We were really getting pressed for space.”

Hoffman said the new 13,500-square-foot space at Genesee Executive Plaza is about 30 percent larger than the company’s prior home, and can eventually accommodate up to an additional 12 employees. Later this year, the company will likely be adding three or four to its current staff of 110.

“We think there’s going to be plenty of more work in the next two or three years,” Hoffman said, noting that the company’s 2012 caseload so far is on track to match 2011’s, when it handled transactions involving around 300 properties nationwide.

Business Doubles in Four Years

Despite a generally improving commercial real estate economy, its overall business volume remains about double what it was three or four years ago, he said, as the company takes on management, receivership, sales and other matters related to commercial properties whose owners have encountered problems paying back loans.

The roster lately has included office buildings, apartments, hotels and convenience stores, most often purchased just prior to the recession by buyers who became overleveraged.

According to the real estate research firm Trepp LLC, the U.S. commercial property loan delinquency rate hit 10.04 percent in May, the first time that it has ever broken through the 10 percent threshold.

The firm primarily tracks loans that are at least 30 days overdue in payments, and which are bundled within commercial mortgage-backed securities (CMBS).

The primary culprit for current delinquencies is five-year loans taken out in 2007, when lending standards were at their weakest, and which have since encountered payback problems. Lenders cut back on long-term CMBS loans starting in the second half of 2007, as the real estate market weakened, meaning that delinquencies should be declining in the second half of 2012.

“The next two or three months could be bumpy, but the second half of the year should bring a leveling off of the rate,” said Manus Clancy, senior managing director at New York-based Trepp.

A Long Way From Las Vegas

Trepp data indicates the San Diego region’s commercial delinquency rate, at 5.76 percent in May, is well below the national rate and far lower than markets such as Phoenix (15 percent), Las Vegas (21 percent) and Atlanta (23 percent).

The research firm Morningstar reported that the nationwide volume of CMBS loans in the hands of special servicers was $83 billion in April, down from $84.4 billion in March and continuing a general downward trend of the past year, as troubled loans get worked out and liquidated.

Hoffman noted that ill-fated property loans made just prior to the real estate meltdown of 2007-08 are still generating so much resolution activity nationwide that his company now competes with a growing list of firms expanding into distressed-property consulting, including law firms, real estate brokers and other financial services providers.

Longtime competitors in the segment include locally based Douglas Wilson Cos. and Meissner Jacquet Investment Management Services.

Hoffman said Trigild, started in 1976, recently got its first-ever assignment in Puerto Rico, when a court appointed it as receiver and asset manager of a 300-unit luxury residential community.

Work in the Pipeline

Earlier this year, Trigild was appointed property manager and receiver for seven apartment developments, totaling 838 units, in Georgia, South Carolina, Nevada and Idaho. It also was tapped by Divco West Properties, the new owner of the two-building UTC office plaza that Trigild now calls home, to oversee day-to-day management duties.

Hoffman said distressed properties are finding buyers in the current market at prices higher than a year ago, often among large real estate investment trusts and overseas investors who see the U.S. market as a safe haven.

However, about $1.7 trillion in U.S. commercial loans will be maturing over the next three years, and some property owners could face problems with loan refinancings if lenders maintain their current conservative underwriting stance. Economic uncertainty in places such as Europe could also have an impact.

“Europe is another situation where people are waiting for the other shoe to drop,” Hoffman said. “What happens there could affect the U.S. property market.”

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