13% of loans could default in $90B debt wave: analysts

Los Angeles /
Jan.January 24, 2017 05:00 PM

From the New York website: Roughly half of the $90 billion worth of commercial mortgages left over from the 2007 lending boom won’t be easy to refinance when they mature, exposing the winners and losers of the real estate recovery.

Banks sold a record $250 billion worth of commercial mortgage-backed securities to institutional investors in 2007. That wall of maturities has been whittled down to about $90 billion as some borrowers paid off their loans early to take advantage of rock-bottom interest rates.

Morningstar Credit Ratings estimates that half of the remaining loans will have difficulty refinancing, Bloomberg News reported. And S&P analysts predict that, in the best case scenario, roughly 13 percent of maturing real estate loans will default, up from 8 percent over the past two years.

“There are a lot of headwinds currently — with the interest-rate increase, with the new administration coming in, and also risk retention,” said S&P researcher Dennis Sim. “Those three wild-card factors could also play a role in how some of the better-performing loans are able to refinance or not.”

Better-performing loans, such as those on top-quality office properties, are considered less risky.

RXR Realty is close to landing a five-year loan to pay off $1 billion in debt that comes due in March at 5 Times Square, the headquarters for Ernst & Young that David Werner bought in 2014 for $1.5 billion.

“We are currently reviewing term sheets from a number of institutions and expect to settle on a lender within a week or so,” said RXR CEO Scott Rechler, whose firm acquired a 49 percent stake in the 39-story property shortly after Werner bought the building.

Retail properties and especially malls hit hard by e-commerce are expected to struggle the most. [Bloomberg]Rich Bockmann


Related Articles

arrow_forward_ios
2121 Avenue of the Stars and 555 West 5th Street
LA, OC see $30B in CMBS loans due this year
LA, OC see $30B in CMBS loans due this year
Preylock’s Brett Lipman and an Amazon warehouse at 12945 Ladera Drive NW in Albuquerque, New Mexico (Getty, Linkedin, Amazon.com, Inc./Public domain/via Wikimedia Commons)
LA investment firm Preylock scores $581M loan for Amazon-leased warehouses
LA investment firm Preylock scores $581M loan for Amazon-leased warehouses
From left: Centennial Real Estate CEO Steven Levin, USAA Real Estate CEO Len O'Donnell, and Montgomery Street Partners co-founders Murray McCabe and Max Lamont in front of a rendering of the planned redevelopment at MainPlace mall in Santa Ana (Centennial, USAA, Montgomery Street Partners, MainPlace)
$141M loan on Centennial’s OC mall heads to special servicing
$141M loan on Centennial’s OC mall heads to special servicing
BlackStone's Stephen Schwarzman with 9028 Dice Road and 20210 S Normandie Avenue (Getty, LoopNet)
SpaceX on radar as Blackstone lands $1.8B CMBS loan
SpaceX on radar as Blackstone lands $1.8B CMBS loan
(Montage Hotels)
State-owned China outfit in $340M refi on Montage Laguna Beach
State-owned China outfit in $340M refi on Montage Laguna Beach
G6 Hospitality CEO Rob Palleschi and Motel 6 San Jose South, one of the largest assets in the portfolio (G6)
Blackstone’s Motel 6 portfolio gets $685M CMBS loan
Blackstone’s Motel 6 portfolio gets $685M CMBS loan
Blackstone Group's Jon Gray and Hudson Pacific Properties's Victor Coleman (Getty, HPP)
HPP and Blackstone refinance Hollywood portfolio with $1B loan
HPP and Blackstone refinance Hollywood portfolio with $1B loan
Josh Zegen and rendering of 21555 Oxnard Street (iStock, Google Maps)
Madison Realty Capital provides $34M loan-on-loan for Warner Center redevelopment
Madison Realty Capital provides $34M loan-on-loan for Warner Center redevelopment
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...