How many times can you have a discussion and insight into CRE problems? At least one more.
Trepp released a research note about a rise of loan extensions in 2023. To set the stage, there have been many recent signs of problems in CRE loans and statuses. Here are a few:
- Loan modifications are already underway with many lenders that don't want to write off value and which were probably nudged on by the final policy on CRE loan accommodations and workouts announced by federal regulators.
- Banks have been increasing CRE loan charge-offs.
- Banks have doubled down on CRE loan reserves.
- According to S&P Global Market Intelligence, banks have built cushions against loss.
- CMBS delinquency rate increases have been a red flag.
- There are a few encouraging signs in office, and yet a lot of office valuations have plummeted.
Put briefly, no one in the industry knows what will happen and there is significant opacity in current conditions, particularly given low transaction rates.
Trepp's observation is that loan extensions through 2023 have been on the rise as a response to both uncertainty and high interest rates.
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