$165 Billion in U.S. Commercial Loans Due in 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.
Commercial loan losses to be worse than feared in U.S. commercial property market
Editor’s Note: I have noticed many “For Lease” signs around downtown. This can not bode well for the owners of these buildings. According to this article, they have an estimate that the default rate could double this year alone, jumping to 3.8%. I did also notice that many of the banks the analysts are watching cautiously, are smaller regional banks that are of the same size as the ones we keep reading about every Friday when another banks gets seized by the FDIC. This will continue but I do think we will see a bailout package for refinancing these notes coming due.
News (CNN Money):
Banks’ losses on loans to businesses will get much worse than investors expect within the next six months, according to an analyst report Monday that said it’s still too early to buy bank stocks.
Losses on business loans should grow much larger during the next six months than they were during the previous two recessions and could peak in a “kitchen sink” of bad news during the fourth quarter, a team of Friedman, Billings, Ramsey & Co. analysts led by James Abbott wrote in a research note.