Article from Bisnow.com on Commercial Real Estate Loans coming due in 2024. Highlights and overview below.
Almost one-fifth of outstanding
commercial real estate debt is due to mature this year, a total of $929B in
debt obligations that will require borrowers to refinance or sell
properties, according to new figures from the Mortgage Bankers Association.
The value of loans set to come due is up
40% from an earlier $659B estimate by the MBA, Bloomberg reports. The outlet attributes the sizable
increase to an uptick in loan extensions and similar delays rather than an
onslaught of new deals.
U.S. commercial real estate backs about $4.7T in
debt, and investors, lenders and regulators have grown antsy as building
values slide and loans mature, Bloomberg reported. Prices on commercial
properties have fallen 21% from an early 2022 peak. Office prices have
dropped most precipitously, sinking 35%.
Particularly in the office market, borrowers have
largely been playing a game of loan extensions when possible, pushing harder
decision points down the road. About 25% of office loans are coming due in
2024, according to the MBA.
While uncertainty around interest rates, unclear
property values and questions about real estate fundamentals have
suppressed transactions of late, it's more likely deals get done this
year, Jamie Woodwell, head of commercial real estate research
at the Mortgage Bankers Association, told Bloomberg.
“This year’s maturities, coupled with greater clarity
in those and other areas, should begin to break the logjam in the
markets," Woodwell said in a statement.
This year could also bring more refinanced loans and
fewer modifications on better-performing properties, Trepp Research Director Stephen Buschbom told Bisnow earlier this year. Still,
if loan modifications continue, it is a signal that the market’s health has yet
to improve, he said.
“If we do start to see some refinances happen at
maturity, that would be a really nice, positive sign to see,” Buschbom said.
“But at this point, I don't think anybody's baseline scenario would be that
they're expecting to see more refinances for office buildings than they did
last year.”.
Weitz Commercial Notes: This is absolutely staggering. I imagine banks will keep 'punting' by doing loan extensions so they don't have to take the loses on their books as well. The entire situation seems to be just kicking the can down the road. As some point, the music has to stop and reality has to sink in, but it's hard to say when that will play out. The middle to end of this year seems like a good guess.
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