NEW YORK CITY-Coast to coast, 2011 will see about 2,000 commercial mortgage loans backed by CMBS come due. That represents an outstanding balance of $22.5 billion, says Fitch Ratings. More than half the loans by balance were originated during the go-go years between 2005 and 2007, a fact that the ratings agency says has implications for refinancing.
“Borrowers of maturing five-year interest only loans will need to contribute additional equity to reduce debt levels,” Adam Fox, senior director at Fitch, says in a release. “Five-year loans will face more difficulty in refinancing, especially office loans with significant upcoming lease rollover.”
Similarly, Standard & Poor’s said Monday that an analysis of loss estimates for 361 CMBS conduit/fusion loans gave the edge to older issues. “Our results indicate that the credit performance of older vintage CMBS should be superior to that of the more recent vintage transactions, with 2007 being the worst of the group,” S&P credit analyst James Digney says in a release.
The 1,973 maturing loans identified by Fitch originated between 1996 and ’07, with an average balance of $114 million. Retail assets back 32% of the loans, followed by office at 30% and multifamily by 16%. Each successive quarter will bring more scheduled maturities, peaking at $6.8 billion due in the fourth quarter.
Two-hundred-and-forty-eight of the loans due to mature this year are in special servicing, according to Fitch. That’s about 12.5%; separately, Moody’s Investors Service said Friday it expects the percentage of conduit CMBS in special servicing to reach 20% this year. However, Fitch noted that about half the specially serviced CMBS loans maturing this year are current on debt service payments.
In addition, Fitch says special servicers have picked up the pace to a remarkable degree. Loans transferring out of special servicing reached a record $27.9 billion during Q3 of 2010, a higher tally than in the last four years combined.
“Loan modifications continue to dominate as a resolution method,” managing director Stephanie Petosa says in a release. “Servicers will resolve loans with increased velocity as liquidity returns to the CMBS market.”
Speaking of the return of liquidity, Moody’s says in its newly issued “US CMBS Outlook” report that it expects to see “increasing or stabilizing property values, higher transaction volumes and greater liquidity for commercial real estate” in ‘11. “An increase in extensions of troubled, but performing loans will likely provide additional breathing room for owners to potentially grow their way out of their problems,” according to the report. In the case of owners that can’t grow out of their current difficulties, Moody’s says, “loss severities will likely continue to rise for loans liquidated over the next year.”
As the current year progresses, legacy CMBS will likely cede more of the spotlight to new issues. Moody’s notes about $13 billion of forthcoming securitizations in the pipeline for Q1, and projects CMBS issuance for the year to reach $37 billion, more than triple the ’10 total of $11.6 billion. Other recent projections have put the new CMBS market at up to $50 billion for the year.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to asset-and-logo-licensing@alm.com. For more inforrmation visit Asset & Logo Licensing.