Maturing Commercial Mortgages May Mean Fewer Refinances

According to the 2013 year-end Trepp report, about $1.4 trillion in commercial mortgages are anticipated to mature between 2014 and 2017. This, coupled with higher taxes and uncertain economic conditions, may result in fewer lenders willing to refinance.

The northeast states (including New York, New Jersey and Connecticut), represent 30% of all maturing commercial mortgage loans. These states have the most loans—$100 billion—that are expected to mature throughout the upcoming years. Following the Northeast, the Southeast has the second highest volume of loans at 20%.

Retail borrowers will have to deal with loan-to-value ratios (LTVs) for loans maturing between 2014 and 2017 consistently higher than those of recently originated loans. This may make it more difficult for retail companies to refinance if their LTV ratios don’t meet the lending requirements.

Office borrowers are expected to see a rise in LTV ratios from 2014-2017 with the need to refinance in 2015, as do industrial borrowers (barring any loosening of lending requirements). Many of those borrowers will be satisfied in 2014 with LTV ratios for maturing loans comparable to those for recently originated loans, but after this year, LTV ratios will begin to peak. On the contrary, hospitality borrowers are expected to be the best-suited in the years to come with low LTV rates, but may face challenges between 2016 and 2017, due to economic flux in that sector.



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