Fitch Ratings has released data indicating that the majority of European commercial property loans that have reached maturity this year remain unpaid.
However the data relates exclusively to those loans that were part of secularization deals structured before the subprime crisis. In other words to commercial mortgage-backed securities deals that were structured in the period between 2004 and 2006.
The reason over 70 per cent of these loans remain unpaid can be traced to the challenges facing investors and financing companies alike in the commercial property market.
A total of 122 commercial mortgage-backed securities loans were due to mature from January-November 2012. Only 24 of them were fully paid out at maturity. The remaining loans are either at a standstill, in a workout, or have had their loan maturity extended.
The commercial mortgage backed securities market in the United States has recovered, but the situation is much different in Europe, where there have been few new issues. Bondholders are therefore faced with lengthy workouts and, in some cases, the loans may need to be restructured.
Refinancing commercial properties in Europe is quite challenging for investors in the current market. Not only are property valuations going down, but banks are looking to dispose of their real estate portfolios.
Alternate lenders, such as insurance companies and new funds have stepped in to fill the gap left by traditional banks, but they are focused on buying Class “A” properties in high profile locations like London.
The future is not looking bright for commercial mortgage-backed securities loans. In 2013-14, a record €31.9 billion in loans will be hitting maturity. Property owners will find it especially difficult to refinance or sell secondary quality assets.
Alessandro Pighi and Mario Schmidt, of Fitch have explained that servicers must find viable solutions, which may include forced sales “if the loan amendments did not improve the underlying collateral performance”.
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I wonder what the after math of this was in the 2013 market, as a lot of these came to maturity.
Refinance hasn’t come any easier, so I thin 2014 will be difficult for alot of this commercial stock