Forecast of Commercial Mortgage Maturities

Approximately $362 billion of commercial real estate debt will mature in 2012, and approximately $1.73 trillion (about the size of California’s economy) over the next 5 years, through 2016.  How the market will address this tremendous demand remains to be seen, especially in light of the fact that about two-thirds of these maturing loans are under water.  Many banks remain concerned about their balance sheets and limiting their commercial real estate exposure, and the CMBS market has not returned to full swing.  Rising values and improved liquidity should improve the loan-to-value picture, but more than half of the 10-year loans maturing in 2016 will still be under water.  Some owners of cash-flowing properties might be able to extend their loans for a few years; some property owners might elect to contribute more equity for a refinance; and some owners will successfully structure a loan workout with the help of an experienced workout consultant; but many owners will lose their property as lenders choose to foreclose or sell the notes to third party investors who will foreclose. The new owners with a lower cost basis will be in a better economic position to adjust rents and fill vacancies, address deferred maintenance issues, and make needed capital improvements.