$103B In CMBS Loans Maturing This Year To Test 'Extend And Pretend'
Approximately $103B worth of CMBS loans are set to mature during the second half of 2023, and another $126B is due to mature in 2024, setting the stage for a tumultuous 18 months in the debt market.
New data from Trepp shows the total CMBS debt due in the next 18 months is $232B, while an additional $51.5B of collateralized loan obligations and $27B of agency debt is also due by the end of next year, bringing the total maturing CRE debt for the next 18 months to $310.5B.
The majority of the loans coming due could be in a precarious position — 10-year deals signed in 2013 and 2014 are in the most precarious positions, due to an average 4% loan rate at origination for fixed coupons, Trepp found. By contrast, the average interest rate for new loans in 2023 is 6.5%, meaning borrowers refinancing will be faced with higher interest expenses and will need to put more money into a deal.
The same danger potentially awaits 10-year loans issued in 2011 and 2012 that have managed to pull off short-term extensions, but today face imminent maturities with even higher rates.
Declining values from appraisals may affect the likelihood of securing new loans for asset classes across the board. Roughly 7,000 such loans across the U.S. are due before the end of next year.
The New York City region has by far the most CMBS debt coming due within the next 18 months at $16.1B. By contrast, the next biggest maturing debts belong to Greater Los Angeles at $4.7B and the $4.4B sum covering the Chicagoland area, per Trepp.
While the CMBS debts affect every asset class, office is in the most peril. The owners of the buildings with the two largest CMBS loans maturing this year — of the 830K SF Seagram Building and 300 Park Ave. in Midtown Manhattan, successfully managed to negotiate extensions, other office properties may not be so lucky.
A deed-in-lieu-of-foreclosure could be approaching Brookfield Asset Management’s 175 West Jackson St. in Chicago, where the 1.4M SF office’s latest appraisal placed its value below the $250M loan balance due in November. Monday Properties was unable to extend or refinance the debt on a 2.1M SF office portfolio in Northern Virginia and is at risk of losing the properties, which were recently valued north of $1B.
Shopping malls provide a blueprint for what to expect for the office sector, Trepp’s analysis said: balloon maturity dates have strongly correlated with defaults.
“The story could get worse for shopping malls and central business district's hotels before it gets better,” Trepp researcher Jack LaForge wrote in his analysis. “For office, the predictions of higher defaults and big losses are probably spot on.”
