Industry observers say a majority of loans due through 2014 may be underwater, meaning more banks will be forced to restructure loans to avoid costly foreclosures. U.S. banks had a historic $1.3 trillion of commercial mortgages outstanding as of Sept. 30, with about $60.5 billion of them delinquent. Approximately $650 billion in banks' boom-time CRE loans are coming due over the next four years, with more than $150 billion maturing in 2010. "Everyone's view is pretty much consistent on this: there are significant numbers of commercial mortgage loans that are underwater because real estate property values have dropped significantly," says Robert Gordon, a partner at the law firm Mayer Brown LLP. "Even for loans that are performing on a cash-flow basis, when they hit maturity, it is going to be difficult to refinance them without additional equity."
However, some industry watchers say concerns of a credit meltdown may be overblown. "Everything is dependent on the economy and how quickly do we see a recovery taking place," says Keith Leggett, the senior economist at the American Bankers Association. "That will be a key factor affecting the commercial real estate market. Because [when] you have high levels of unemployment, you're probably also going to see higher vacancy rates. This is going to put pressure on rents.
"Source: American Banker, Matthew Monks (12/29/09)
REALTOR® Magazine-Daily News-Trouble for Commerial Loans in 2010
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