It’s going to be a tough year to refinance commercial mortgages

Whitehall funds-owned Park Central Hotel cannot refinance

TRD New York /
Dec.December 28, 2011 10:49 AM

Despite the historically low interest rates, commercial owners worldwide may face significant hurdles refinancing in the coming year, the Wall Street Journal reported. And most of the five-year mortgages used for commercial properties when the boom was at its height will be coming due next year.

For instance, a venture that includes Goldman Sachs’ Whitehall funds has a $203 million mortgage on the Park Central Hotel, at 870 Seventh Avenue between 55th and 56th streets, that matured in November, the Journal said. Despite being current on the mortgage, the group was unable to refinance, and is asking the lender to accept a discounted payoff on the loan, according to real estate analytics firm Trepp, which also shows the mortgage as delinquent.

Of the $70 billion in commercial mortgage-backed securities outstanding that will mature next year, $15.5 billion of the fixed-rate mortgages and $12.2 billion of the adjustable-rate mortgages have been flagged by Trepp as potentially difficult to refinance.

“The merry-go-round will stop, and they are not all going to get financing,” said Eric Thompson, a managing director at Kroll Bond Rating Agency.

Analysts told the Journal it will be hard to calculate how many commercial property loans will default. But the delinquency rate, which rose to 9.5 percent from .3 percent in the last three years, is expected to rise further, according to Trepp and other analysts. [WSJ]

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