Much has been written about a looming wall of commercial mortgage-backed securities that will either have to be refinanced or paid off in 2017. About $2.4 billion in CMBS issued in 2006 and 2007 were classed as delinquent in June, and experts believe that this could have caused delinquency rates in Missouri and around the country to soar to 5.75 percent. The 28 basis point surge is the biggest increase in five years according to a real estate information and consultancy firm. The delinquency rate stood at 4.6 percent in June 2016.
The rise in delinquency rates was particularly pronounced among residential multifamily projects, but an industry representative said that the figures were heavily influenced by two large defaults in Virginia. While delinquencies were up for office, factory and hotel projects, it is the retail sector that has lenders and industry experts most worried.
Analysts with Wells Fargo Bank say that commercial property developers in the retail sector are finding it more and more difficult to refinance their maturing CMBS. While the premium mall properties favored by real estate investment trusts are still valued by banks, shopping centers and what are known as B and C malls are viewed less favorably. However, experts say that the prospect of repossessing a beleaguered retail project has prompted some banks to soften and offer renegotiated terms.
When traditional banks are unwilling to make funds available, commercial property developers sometimes turn to private lenders. While these lenders may make loans when others are reluctant to do so, they are not constrained by federal banking regulations and often charge high rates. Attorneys with experience in this area could help developers to choose finance packages that are suited to their needs by examining loan documentation carefully and performing thorough due diligence on the lenders involved.
