At its peak in 2007, the Commercial Mortgage-Backed Securities (CMBS) loan market funded over $230 billion in the U.S. That market virtually dried up in 2009, with a more modest $11 billion.
At a recent NAIOP program, Banking on Real Estate: Capital Flows and the State of CRE Lending, Stephen Holmes, Executive Director at Morgan Stanley, indicated that more than $1 trillion of CMBS loans will be maturing over the next five years, with $100 million coming due this year alone. Without a serious resurgence in this market, it is hard to know where these refinancing dollars will be found, especially with many of the assets over-leveraged based on today’s market values.
Not surprisingly, there has been a rise in the delinquency rates on CMBS loans, with more than 8% of current outstanding loans at least 60 days past due. Standard & Poor’s is currently expecting that rate to reach as high as 11.5% by year’s end.
The good news is that this important source of Wall Street financing is coming back. Unfortunately, it might be too little, too late. (Read Banker & Tradesman’s account of the event here)