‘Foong on Finance’ with Keat Foong: A Wave of Distressed Properties

The word is that special servicers are so inundated with defaulted loans that often, they can barely return the borrowers’ calls.

Well, if you think there are a lot of loans defaulting currently, this is not even the peak year of CMBS loan maturities. According to data from reserach company Trepp, L.L.C., only $9.3 billion in CMBS loans are maturing this year—compared to $44.7 billion in 2011 and $57.6 billion in 2010!

“The real refinancing hurdle for the market will not take place until the 2015 to 2017 time period,” says Paul Mancuso, vice president of product management. “During this period, all 10-year issuance from the market boom time period of 2005-2007 is scheduled to mature.” CMBS loan maturity volume in this cycle will hit a high of $134.1 billion, in 2017.

One can only hope that CMBS securitization would have recovered enough to be able to support commercial real estate’s refinancing needs at that point. In that regard, the CMBS market appears to be taking baby steps towards recovery, and industry participants expect even more new CMBS loan originations next year.

Meanwhile, especially if financing and the economy do not recover, there may be many more distressed properties to come onto the market. Many presenters at last week’s Distressed Real Estate Summit, sponsored by GreenPearlEvents.com, said we are only in the first inning of a distressed real estate market.