While the housing market has been struggling nationwide, there are problems on the horizon in Florida with commercial properties trying to refinance, sell or recapitalize.
Lenders are now trying to deal with loans that were made during the real estate boom of 2007. Commercial real estate properties, like residential properties, have seen a fall in value and many lenders are finding themselves with a loan to ratio value of 100 percent -- hardly an ideal situation when trying to find an investor to buy or refinance the loan. Most lenders aren't interested in a highly leveraged loan, so a borrower could find an equity partner to add more capital to the deal, lowering the overall amount of debt on the property to make it more attractive to refinance.
Some real estate experts feel that this is only the first wave of maturing loans, with others scheduled for 2014 and 2017, when the seven and 10 year deals were underwritten during the height of the real estate boom.
Large commercial mortgage loans typically require a balloon payment upon the maturity date, and many companies don't have the money to make the payment and their usual sources of lending have shrunk. Even the European market is dealing with its own debt crisis and has virtually stopped underwriting loans in the United States. The only option for these investors is insurance companies, but they are more conservative in their lending standards and are very selective on the type of debt that they will take on.
The result may be that there will not be enough money available to refinance everything that is coming due. As a last effort, lenders could extend loan maturity dates in the hopes that the property value will increase or they may pursue foreclosure.
On the other side, there are properties out there that are able to pay down their loans, but they will still have to deal with a soft real estate market. If you are in a situation with your commercial property and aren't sure what your options are, a qualified attorney specializing in commercial real estate can help. They understand what affects the marketplace and may be able to assist you in taking advantage of alternative financing sources that would fit your situation.
Source: Herald-Tribune, "Maturing commercial real estate loans causing a scramble," Julie Satow, Jan. 30, 2012
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