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Commercial-Property Loans Coming Due in US Jump to $929 Billion
Posted on 2/14/24 at 12:40 pm
Posted on 2/14/24 at 12:40 pm
(Bloomberg) -- Nearly 20% of outstanding debt on US commercial and multifamily real estate — $929 billion — will mature this year, requiring refinancing or property sales.
The volume of loans coming due swelled 40% from an earlier estimate by the Mortgage Bankers Association of $659 billion, a surge attributed to loan extensions and other delays rather than new transactions.
With the Federal Reserve signaling that it’s done hiking interest rates, it’s likely more deals will get done this year, according to Jamie Woodwell, head of commercial real estate research at the bankers group.
About $4.7 trillion of debt from all sources is backed by US commercial real estate, ratcheting up concern among regulators and investors as building values slide. Increasing defaults and write-downs have hit lenders such as New York Community Bancorp, KKR & Co.’s commercial mortgage real estate investment trust and holders of commercial mortgage-backed securities.
An estimated $85.8 billion of debt on commercial property was considered distressed at the end of 2023, MSCI Real Assets reported, citing an additional $234.6 billion of potential distress. LINK
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Posted on 2/14/24 at 12:56 pm to Jbird
Oof
Posted on 2/14/24 at 1:00 pm to Jbird
I wonder if this will be another too big too fail situations where we privatize profit and socialize losses.
Posted on 2/14/24 at 1:23 pm to Jbird
The real reason people are wanting the Fed to cut rates. Not that inflation has been slowed but to save their own asses.
This post was edited on 2/14/24 at 1:27 pm
Posted on 2/14/24 at 1:25 pm to Jbird
I see a lot of businesses walking away from the debt.
Didn’t one of the major hotels in SF already tell the bank “frick it, you can have this back” because the area had gotten so bad they couldn’t get convention business?
Didn’t one of the major hotels in SF already tell the bank “frick it, you can have this back” because the area had gotten so bad they couldn’t get convention business?
Posted on 2/14/24 at 1:27 pm to teke184
quote:I believe so.
Didn’t one of the major hotels in SF already tell the bank “frick it, you can have this back” because the area had gotten so bad they couldn’t get convention business?
Posted on 2/14/24 at 1:30 pm to teke184
Property expense increases, i.e. insurance costs, have wrecked pro-forma projections for a lot of commercial RE.
Posted on 2/14/24 at 1:57 pm to Bill Parker?
Not only that but the boom in telecommuting during Covid and the public restrictions during and after it also severely cut the traffic to offices and to the businesses that service them.
If you have a business in Times Square, you aren’t surviving alone on business from locals in Manhattan but also people commuting from other boroughs, NJ, Connecticut, and tourists.
You cut off one or more of those and your revenue flatlines even if your expenses decline for some reason.
If you have a business in Times Square, you aren’t surviving alone on business from locals in Manhattan but also people commuting from other boroughs, NJ, Connecticut, and tourists.
You cut off one or more of those and your revenue flatlines even if your expenses decline for some reason.
Posted on 2/14/24 at 2:27 pm to Jbird
Is this a bubble?
Kind of feels like a bubble...
Kind of feels like a bubble...
Posted on 2/14/24 at 3:32 pm to Jbird
There is a ton of capital willing to buy those loans at a discount. Banks are already increasing reserves to eat the loses, some will fail. The extend and pretend days are numbered. Sponsor/LP equity will get wiped out and the cycle will start again.
Posted on 2/14/24 at 3:34 pm to snakanator
quote:
Banks are already increasing reserves to eat the loses, some will fail.
Based on what was published some time back, I think the likelihood is that the four biggest banks keep getting larger while the rest either merge with them or go bust.
IIRC, this was when JP Morgan was poaching depositors from certain banks which, when they moved, blew out those banks’ ability to do anything due to required percentages.
Posted on 2/14/24 at 3:44 pm to Jbird
A realtor that's helping me find a rental house mentioned that I should look for steals in CRE.
Think she might have just failed the test. No fricking way I'm going to spend half a mill or more on something that will be empty for years. Especially for a real estate novice like me.
I travel a lot for work. My company has scaled back office space in almost every market. I've seen for lease signs in retail all over the place.
Think she might have just failed the test. No fricking way I'm going to spend half a mill or more on something that will be empty for years. Especially for a real estate novice like me.
I travel a lot for work. My company has scaled back office space in almost every market. I've seen for lease signs in retail all over the place.
This post was edited on 2/14/24 at 3:53 pm
Posted on 2/14/24 at 3:57 pm to Jbird
almost all commercial loans have to be redone every 3-5yrs so this is going to hurt with current commercial rate being above 7%. the really shitty part is in the last 2 weeks residential rate are are trending up by .5%. these rates aren't coming down like people expected. CPI missed it's target this week and rates have went up every day since monday.
Posted on 2/14/24 at 4:54 pm to 4cubbies
This is going to make “too big to fail” look like a walk in the park, what’s COMING is bigger than just the housing market.
Buckle up and prepare, most of all, turn to God and pray for mercy on this country and world.
The social collapse is already happening & when that meets with the financial collapse, it’s going to be chaos in the streets.
Anyone denying this or are libtard Rino types, your the Enablers!!!
Buckle up and prepare, most of all, turn to God and pray for mercy on this country and world.
The social collapse is already happening & when that meets with the financial collapse, it’s going to be chaos in the streets.
Anyone denying this or are libtard Rino types, your the Enablers!!!
Posted on 2/14/24 at 4:55 pm to Westbank111
quote:
The social collapse is already happening & when that meets with the financial collapse, it’s going to be chaos in the streets.
I recommend investing in canned goods and shotguns.
Posted on 2/14/24 at 5:03 pm to Jbird
Not a big CRE expert here, so my questions aren't exactly rhetorical...
Does occupancy translate to property value?
In other words, would declining occupancy mean a decline in asset value?
Would a decline in asset value relative to the outstanding debt make it tougher to roll over those loans? Tougher to collateralize?
What's the current CRE rate, something like 7%?
Seems like a lot of balance sheet distress.
Does occupancy translate to property value?
In other words, would declining occupancy mean a decline in asset value?
Would a decline in asset value relative to the outstanding debt make it tougher to roll over those loans? Tougher to collateralize?
What's the current CRE rate, something like 7%?
Seems like a lot of balance sheet distress.
Posted on 2/14/24 at 6:19 pm to Jbird
Some of this could have been extended due anticipated rate cuts.
Looks like a roughly 7% distressed rate. This doesn’t necessarily mean default.
Bank earnings will likely take a hit, but it likely won’t be as bad as 07-08. Banks have been required to do additional stress testing on their portfolios and have reserve requirements when necessary.
Looks like a roughly 7% distressed rate. This doesn’t necessarily mean default.
Bank earnings will likely take a hit, but it likely won’t be as bad as 07-08. Banks have been required to do additional stress testing on their portfolios and have reserve requirements when necessary.
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