Bloomberg News
In Print: Friday, December 9, 2011
Summary: $19 billion worth of commercial mortgage notes will start coming due in less than 30 days. How/if those notes are honored is causing uncertainty. With Europe in turmoil (see There's About To Be A Massive Real Estate Crash In Central Europe) and the U.S. economy sputtering along it is doubtful that refinancing will be an option for many.
Key Quotes:
About 43 percent of the $44 billion in loans packaged into bonds that come due next year were arranged in 2007 before property values tumbled 42 percent, according to Bank of America. The largest deal ever, a $7.3 billion issue by Goldman Sachs and Royal Bank of Scotland Group, has $586 million of loans maturing in 2012, Bloomberg data show.
"These loans were done at the peak of the market," said Julia Tcherkassova, a commercial mortgage debt analyst at Barclays in New York. "They will have trouble refinancing today."
Loans packaged and sold as bonds typically have terms of five or 10 years. Borrowers with five-year mortgages are finding it "much tougher" to repay, according to a Nov. 10 report from Wells Fargo Securities. About 39.4 percent of five-year loans packaged into bonds were able to refinance in 2011, compared with 80 percent of 10-year commercial mortgages, the report said.
The surge in 2007 loans coming due won't necessarily lead to higher defaults as loan servicers choose to extend the debt rather than foreclose, according to Alan Todd, a New York-based analyst at Bank of America.
Read the full article at Rise in commercial mortgage delinquencies is feared.
A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga
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