About 80% of the loans securitised in Moody’s-rated European commercial mortgage-backed securities (CMBS) that matured in the first quarter of the year were not repaid by their scheduled maturity date, according to Moody’s Investors Service.
This figure has more than doubled since it stood at 35% in 2009, reflecting the weak state of the lending market.
According to a new report, European CMBS Loan Maturity Outcome Q1 2012, “The main driver underpinning whether or not maturing loans are refinanced is the loan-to-value (LTV) ratio.”
Moody’s vice-president Oliver Moldenhauer, senior analyst and author of the report, said: “Up to a Moody’s LTV of 80%, approximately two-thirds of the loans were repaid and the rest extended. In the LTV bucket above 100%, nearly all the loans defaulted at their scheduled maturity date.”
Loan size is also a factor in determining repayment upon maturity. Most repaid loans had balances of less than €25m, and only one of the 15 loans with a balance of €75m or more was repaid by the scheduled loan maturity date.
Country and property type are not clear indicators for the refinancing of loans under review. While the sponsor did not provide a clear indicator of refinancing ability for the loans covered by the report, anecdotal evidence of maturing loans over the past two years indicates that institutional quality borrowers have a better chance of obtaining refinancing, especially for large loans. Most loan extensions are for one year.
The peak in refinancing needs will occur in 2012-13, when about €38bn of loans securitised in large multi-borrower and single-loan transactions will have to be refinanced. As banks need to deleverage because of regulatory requirements, commercial real estate financing will remain constrained and most loans will not be repaid.
