Link to Article: This Analyst Believes Banks Will Extend CRE Loans As Maturities Come Due Considering the current state of Banking and the overall lending environment, extensions may ease some stress. Will they be offered? If you do not have time to read the entire article, please allow me to extract and apply the relevant.
Aaron Jodka, Colliers’ research director of U.S. Capital Markets, "believes that banks and other lenders may be willing to renew or extend loans for the coming wave of maturities coming due as long as they meet coverage ratios."
If the lender is in a good financial position and the property is performing, of course they will extend. Additionally, most maturing loans are at lower rates and the extension will carry a higher current market rate. We call this low hanging fruit.
“Ultimately, this will buy time, smooth out maturities and push some loans into the future.”
Good news for performing loans at stable lenders.
“Debt is still available, despite the recent volatility in the banking sector. The middle markets are still active, particularly between banks with longstanding relationships with borrowers. Life companies are fighting to win deals and need to put capital to work.”
All true, however, you better have a meaningful depository relationship or lower loan to value. Why are we focused on loan maturities?
"The Mortgage Bankers Association estimates that $4.47 trillion of commercial real estate loans are on lenders’ books. About three-fifths or 60% of these loans are due in four years or by 2027. During this year, more than $700 billion in loan maturities is coming due."
Any property class concentration?
"In the short term, the asset classes facing the greatest maturity wall are hospitality and office. Between this year and next, 54% of hospitality loans are expected to mature while 40.9% of office loans will. More than half of these loans are estimated to be on bank balance sheets."
Office cannot catch a break. Some see stress, others see opportunities.
Contributed by: Kyle Nagy
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