Banking Pinches Socal

LOS ANGELES—The other shoe has yet to fall, but Dean Pappas, a partner with Goodwin Procter’s real estate practice in Los Angeles, thinks it could drop soon.

“I don’t think that this crisis has even hit the commercial market yet,” he says. “When you consider all the securitized debt floating around out there on the commercial side, and the typical two- to four-year terms, all this debt that has put on the books in ’03, ’04, ’05, ’06 and ’07 hasn’t rolled yet. All that debt is going to be coming due, and that debt went pretty deep into the capital stack on very inflated pricing.”

He adds, “The Fed is focused on the residential side, but they aren’t saying anything about commercial. There’s some potentially scary stuff out there with the commercial mortgage debt.”