Your Commercial Real Estate Source in the San Francisco Bay Area
By Alex Finkelstein
It’s not a pretty picture. Numerous borrowers who took out commercial real estate loans in 2007 find themselves defaulting on the payback today, according to the latest research from New York City-based Trepp LLC. Here is what Trepp found:
“We predicted late last year that the delinquency rate would rise largely on the impact of 2007 loans coming due, and today’s report underscores that forecast,” says Manus Clancy, senior managing director at Trepp
“After the rate fell nicely in January and February, we were cautiously hopeful that we’d be wrong. This month’s report shows that the market has a lot of wood to cut and that a rate north of 10% can’t be ruled out.”
For the second straight month, loss resolutions were relatively modest, Clancy says. At about $1 billion, the number was lower than what the CMBS market has been seeing in recent months.
The removal of these loans from the delinquent loan category attributed about 15 basis points of downward pressure on the delinquency rate, according to the Trepp report. Loans that were cured in March put an additional 43 basis points of downward pressure on the rate.
In the banking sector, Trepp data found:
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Summary: Bad debt is coming home to roost. 5 to 7 year loans are coming due now and may weigh on the commercial real estate market. Good news for some areas is that many institutional investors are cash heavy and looking for deals. That may help ease the burden as this bad debt cycles through.