More Commercial Lenders Are Losing Patience As Debt Vultures Circle
Commercial real estate lenders are increasingly losing patience with the owners of buildings where revenue has dried up since the outbreak of the coronavirus pandemic.
Lenders have recently become more aggressive in foreclosing on retail properties whose mortgages have not been paid in months, The Wall Street Journal reports. Many may be motivated to cut their losses and ensure as much repayment as possible in reaction to devastating drops in value at retail and hospitality properties this fall.
As the coronavirus comes roaring back across the U.S., many building owners are similarly giving up on hopes of keeping their properties. Borrowers of nearly 100 CMBS loans backed by commercial properties have indicated their willingness to turn the keys over to their senior lender, according to an Oct. 22 report by CMBS market monitoring firm Trepp. Together, that amounts to just under $4B in debt.
Of the borrowers willing to surrender their properties, 26% are owners of regional shopping malls, Trepp reports, making it the most common asset class to be affected. Tied for second-most-common are full-service and limited-service hotels, with over 10% more borrowers ready to give up than the next tier of properties. The properties on which Trepp reported do not include any already surrendered to lenders.
As offices, hotels and retail continue to operate at far below capacity, properties across the world are dropping in value by the day, a fall which is likely to correspond to financial losses for banks, CNBC reports. As hope for a quick recovery dims along with the shortening days, the commercial real estate market is increasingly looking to cut its losses.
Waiting on the sidelines are private debt funds, which have built up war chests to make more aggressive loans on distressed properties, Bloomberg reports. In September, Blackstone Group closed on the Blackstone Real Estate Debt Strategies IV fund at $8B, the largest of its kind.
Such aggressive deals are more likely to come attached to multifamily and industrial properties, which have not suffered the losses of hotels and retail, a representative from Madison Realty Capital told Bloomberg.