IREM President Pamela W. Monroe warned more and more distressed commercial real estate assets will materialize in the coming months because of liquidity and other problems. "We don't yet have a clear direction on how the government is going to deal with these troubled assets," says Monroe, vice president of operations at Community Realty Management in Pleasantville, NJ.

Delinquencies on commercial mortgages could rise to 2.4% for the third quarter, from 1.9% for the second quarter, according to an estimate from Foresight Analytics, an Oakland, CA-based research firm. The 50 basis-point spike is the most rapid rate of increase since it started moving up in 2006, the company reports. "It could be an indication of more problems ahead, especially since the recent seizure in the credit markets really first hit in mid-September and would not be reflected in the third-quarter figures," Foresight Analytics states.

Because of the turmoil in the real estate market, both IREM and BOMA predict efficient and effective building operations, as well as the ways commercial properties are managed, marketing and leased, will become increasingly important.

Just this month, BOMA launched Rx-Resource Exchange, a comprehensive web-based menu of resources to help commercial real estate professionals cope with the economic downturn. The goal was to create "a one-stop shop with all the tools property professionals need to both enhance building operations and gain professional development insight," BOMA states. The site advises CRE pros to brush up on their property management skills, encourage tenants help cut costs through energy efficiency practices and reduce overall energy consumption by signing on to BOMA's 7-Point Challenge.

Like BOMA, IREM is stressing the importance of education and careful property management. "IREM believes in the power of knowledge and the importance of sharing it," Monroe explains. "So the organization has identified distressed property member experts for each key property sector."

These experts will serve as information resources, she explains. They will contribute to IREM webinars that address distressed property management, provide content on the subject for the Journal of Property Management and other IREM publications and take key roles on IREMFIRST, a recently relaunched website developed as a resource "For Information, Resources, Solutions and Training," according to the site.

Monroe says IREM designed the site for professional real estate managers, but expects owners and investors will also benefit from its use. "The need for superior real estate management, marketing, and leasing skills and a proven record of performance will become increasingly and acutely apparent [as troubled properties increase]," Monroe says. "Members of IREM have extensive training in managing assets. We know how to enhance value for our owners, and may also be able to reach out to banks and lenders for them as they try to reposition their assets."

Experienced real estate managers can "inject value back into distressed properties by protecting income streams, controlling expenses, positioning and/or repositioning them to deliver the best possible ROI and, ultimately, to command the best possible price when they are sold," she continues. "Simply stated, they know how to salvage, maintain, reshape and remarket what is expected to be an enormous pool of troubled real estate assets."

IREM recently convened a group of volunteer leaders who weathered the real estate market turmoil of late1980s and early1990s to get their observations on the current crisis. They noted:

• The culprit that triggered the S&L crisis of the early 1990s was too much supply and too little demand. Today's culprit is excessive leverage and unrealistic appreciation expectations.
• While real estate is cyclical, not all property types are at the same place in the cycle at the same time. One property type may be doing well while another may be suffering from overbuilding.
• The first thing managers should do is analyze distressed properties for their best use, based on the owner's goals.
• Advice should be property specific and location specific.
• The end-product of comprehensive research and analysis should be a management plan that details all aspects of the property and includes an analysis of marketplace dynamics, identification of the property's problems and challenges, identification and analysis of possible solutions and a recommended solution that reflect the owner's goals.
• Attention to detail and 'out-of-the-box' thinking, coupled with the state of the art technology, is essential.