Troubles For Maturing Commercial Loans

After disappointing August 2010 residential home sales results (sales were 25.5% below July 2009 numbers) here comes commercial real estate market. There is some $1.4 trillion of commercial real estate debt coming due by the end of 2014. About 52% of those commercial mortgages are attached to properties that are underwater, according to debt-analysis company Trepp LLC. And as the economic recovery sputters, owners of struggling properties are realizing a big property-value rebound isn’t imminent. This data can be easily supported with Fitch Ratings latest findings in commercial mortgages.According to Fitch Ratings its latest weekly U.S. CMBS newsletter September 2010 brings 126 U.S. CMBS loans to maturity, with almost half of them are in special servicing -  either delinquent or in foreclosure.The maturity breakdown by month through December is as follows:
September: 126 loans; $962 million (43% specially serviced);
October: 159 loans; $2.1 billion (34%);
November: 158 loans; $1.6 billion (14%);
December: 176 loans; $1.7 billion (16%).
This trend is likely continue into 2011, when 2,198 fixed-rate commercial mortgage loans (representing $26.5 billion) mature with 17% already in special servicing.Fitch expects loans secured by office, retail, and hotel properties from the 2006 and 2007 vintages to be the most difficult to refinance in 2011. “Recent vintage loans have little or no amortization and are maturing in a higher mortgage rate environment with stricter underwriting standards,” said Fox.So it’s obvious that commercial lenders will have plenty of opportunities to go through some of those loans and pick the best ones. Typically community banks, smaller regional banks and credit unions will have a chance to pick up and restructure some of those loans. The only caveat is that substantial pay down will be required in order to restructure and refinance most of those loans.  

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