$165 Billion in U.S. Commercial Loans Due in 2009

by LJ Miehe on July 27, 2009

Editor’s Note: First American is a large title company that has various data services they provide for the real estate industry.  With First American reporting that commercial rental rates are dropping, that means the Net Operating Income (NOI) on many of these maturing loans are going to be reduced.  That means it could be problematic when you go to value the property to refinance and the it is valued less than the mortgage that is attached to it.  Either the borrower will have to make up the difference or they will lose equity built up in the property when it gets finance at a lower value.

News (Bloomberg):

Almost $165 billion in U.S. commercial real estate loans will mature this year and need to be sold or refinanced as rents and occupancies fall, according to First American CoreLogic.

The U.S. South has the most maturing loans with 60,893 mortgages valued at $96 billion coming due on shops, offices, hotels, apartment buildings and land, Santa Ana, California- based First American said in a report. The West is second with 20,549 mortgages maturing for a value of $35 billion.

Commercial property owners are struggling to pay debt as the recession reduces demand and forces landlords to cut rent. U.S. apartment vacancies reached a 22-year high in the second quarter and office vacancies rose to the highest in four years, real estate data company Reis Inc. said earlier this month. Properties worth more than $108 billion were in default, foreclosure or bankruptcy as of July 8, according to data firm Real Capital Analytics Inc.

“As long as prices contract, we expect loan performance will worsen and that will make financing difficult,” Sam Khater, senior economist for First American, said in an interview. “Delinquencies and notices of default are rising, and we expect that to continue.”

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