Repayments of commercial mortgage-backed securities loans are forecast to dive in July as financing conditions remain poor for secondary property.
Ratings agency Fitch said this week that five loans that are maturing next month are financed by bonds falling due only two years later. This limits flexibility regarding extensions and may lead to limited recoveries.
The lack of options to extend loans over the period between loan maturity and the legal final maturity of the bonds – and to avoid default – may lead to special servicers overseeing the forced sale of assets secured by these loans.
Earlier this year the first European CMBS of recent vintage went into default after a workout of the loan secured by Uni-Invest’s portfolio of 203 secondary and tertiary Dutch office and industrial assets could not be undertaken during the “tail period”.
The company is now set to be taken over by private equity firms Patron and TPG and investors in all of the junior bonds have had their positions wiped out.
The warning from Fitch follows a poor quarter for loan repayments. Rival agency Moody’s reported that just 21% of CMBS loans that matured in the first three months of the year were repaid.
Moody’s said that of the 47 CMBS loans due to mature in the first three months of the year, 37 remained unpaid at maturity.
It added that the amount of loans being repaid has fallen steadily from around 65% in 2009.
