The economy continues to present unique challenges to commercial real estate borrowers and holders of CMBS loans. Many have defaulting loans, which, often, are not the result of poor business decisions, but more a product of the year they were initiated or, in some cases, the maturity of ?extend and pretend? loans.
According to Moody?s/REAL Commercial Property Price Index, commercial real estate prices increased 90 percent from 2001 to 2008. The result throughout this recessionary market was that defaults accelerated from 1-10 percent in 2008 and are expected to rise to 12 percent by year-end 2011, according to Moody?s analysts.
With banks holding on to distressed real estate, and billions in special servicing and early CMBS maturities coming due, it could take years to rebalance these assets either through restructures or foreclosures. As a result, a massive amount of real estate will eventually flood the market or trickle out through a prolonged period of economic stagnation, which is not a favorable outcome for most.
So, what are your alternatives to an over leveraged loan coming due? You?ve lost your initial equity, markets are seeing some recovery?but not fast enough to even cover the debt?and partners are hesitant to invest new equity.
Read more at DRealPoints
Head of the Munsch Hardt (Dallas law firm) Hospitality & Mixed Use Development Group, and former developer of affordable housing. I'm i This entry was posted in Uncategorized. Bookmark the permalink.Source: http://dfwreimagined.com/2011/07/04/drealpoints-restructuring-commercial-loans/
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