Boom Era US Commercial Mortgage Holders Missing Out on Recovery

Posted on 30 March, 2013 by Jodee Redmond

With a delinquency rate of 14.6 per cent, boom-era commercial mortgage holders are missing out on the U.S. real estate recovery, according to Trepp LLC.

The data provider has released a report showing that the average delinquency rate for the overall market is currently sitting at less than 10 per cent over the past year. The amount of past due payments has been declining since hitting a peak of 10.34 per cent in mid-2012. It fell to 9.42 per cent last month, according to the New-York based firm.

Bank loans from the boom era are still struggling, even as commercial property values in the U.S. have risen by one-third since bottoming out in January 2010, according to Moody’s Investors Service.

Debt servicers have been busy reworking loan terms and selling off distressed buildings which has pushed down the overall delinquency rate. The overall percentage of 2007 mortgages that have fallen behind on payments is still in the double digits, according to Trepp.

The largest loan to go into default this month was a $190 million mortgage on Washington’s Renaissance Mayflower Hotel. According to data compiled by Bloomberg, the borrower received an extension in 2010. Rockwood Capital LLC acquired the property in 2007.

A $200 million mortgage on the hotel from a unit of Unterschleissheim, a German-based Hypo Real Estate Holding AG, was packaged into in a $3.5 billion commercial-mortgage backed securities offering by Bank of America in July of 2007.

The White Plains, a New York-based firm, was not able to pay off the debt, which matured on March 1 of this year, according to Barclays.

Sales of commercial mortgage bonds, which are linked to hotels, shopping malls, and high rise towers, are expected to increase by more than 50 per cent to $70 billion in 2013, according to Credit Suisse Group AG. In 2007, a record-setting $232 billion in bonds were sold, according to Bloomberg.

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