"A 1.5trn debt wall is looming for US commercial properties\u00a0"

" A 1.5trn debt wall is looming for US commercial properties\u00a0 \r\n\r\nAlmost $1.5 trillion of US commercial real estate debt comes due for repayment before the end of 2025. The big question facing those borrowers is who\u2019s going to lend to them?\r\n\r\n\u201cRefinancing risks are front and center\u201d for owners of properties from office buildings to stores and warehouses, Morgan Stanley analysts including James Egan wrote in a note this past week. \u201cThe maturity wall here is front-loaded. So are the associated risks.\u201d\r\n\r\nThe investment bank estimates office and retail property valuations could fall as much as 40% from peak to trough, increasing the risk of defaults.\r\n\r\nAdding to the headache, small and regional banks \u2014 the biggest source of credit to the industry last year \u2014 have been rocked by deposit outflows following the demise of Silicon Valley Bank, raising concerns that will crimp their ability to provide finance to borrowers.\r\n\r\nThe wall of debt is set to get worse before it gets better. Maturities climb for the coming four years, peaking at $550 billion in 2027, according to the MS note. Banks also own more than half of the agency commercial mortgage-backed securities \u2014 bonds supported by property loans and issued by US government-sponsored entities such as Fannie Mae \u2014 increasing their exposure to the sector.\r\n\r\n\u201cThe role that banks have played in this ecosystem, not only as lenders but also as buyers,\u201d will compound the wave of refinancing coming due, the analysts wrote.\r\n\r\nRising interest rates and worries about defaults have already hurt CMBS deals. Sales of the securities without government backing fell about 80% in the first quarter from a year earlier, according to data compiled by Bloomberg News.\r\n\r\nAmid the gloom, there are some slivers of good news. Conservative lending standards in the wake of the financial crisis provide borrowers, and in turn their lenders, with some degree of protection from falling values, the analysts wrote.\r\n\r\nSentiment toward multifamily housing also remains much more positive as rents continue to rise, one reason why Blackstone Real Estate Income Trust had a positive return in February even as rising numbers of investors lodge withdrawal requests. The availability of agency-backed loans will help owners of those properties when they need to refinance.\r\n\r\nStill, when apartment blocks are excluded, the scale of the problems facing banks becomes even starker. As much as 70% of the other commercial real estate loans that mature over the next five years are held by banks, according to the report.\r\n\r\n\u201cCommercial real estate needs to re-price and alternative ways to refinance the debt are needed,\u201d the analysts said.\r\n\r\nEuropean real estate issuers, meanwhile, have the equivalent of more than \u20ac24 billion due for repayment over the remainder of the year, Bloomberg Intelligence analyst Tolu Alamutu wrote in a note.\r\n\r\n\u201cWe are definitely seeing real estate companies do all they can to delever - scaling back investment programs, more joint ventures, bond buybacks and where possible, dividend cuts,\u201d she said in an email. \u201cDisposals are a key focus too. Some recent comments from real estate issuers suggest it\u2019s still not easy to sell large portfolios.\u201d\r\n\r\nElsewhere:\r\n \r\n \t Investors snapped up Europe\u2019s first subordinated bond sale in almost a month after the market for such debt was effectively shut by Swiss regulators\u2019 decision to wipe out $17 billion of Credit Suisse AG\u2019s junior notes. Meanwhile, a global index linked to so-called contingent convertible bank bonds rebounded, reaching levels seen before the Credit Suisse bond writedown. \r\n \t A 954 billion yuan ($139 billion) corner of China\u2019s credit market has been showing that smaller banks aren\u2019t without some challenges of their own. Capital bond issuance by city and rural commercial banks during the first three months of 2023 plunged 70% from a year earlier, data compiled by Bloomberg show. \r\n \t A group of Canadian Pacific Railway Co. creditors are trying to have $2.4 billion of bonds repaid early \u2014 and at a premium \u2014 after they say the company missed a deadline tied to its acquisition of Kansas City Southern, Bloomberg News reported Thursday. The efforts are being contested by the company, which says its requirements have been satisfied. \r\n \t Sound Point Capital Management is buying Assured Guaranty\u2019s collateralized loan obligation platform, forming a $47 billion credit investment firm that will be the fifth-largest CLO manager globally. \r\n \t China Evergrande Group, the developer at the heart of the nation\u2019s property crisis, said it signed restructuring support agreements with some dollar bondholders backing its proposed debt restructuring. Meanwhile, another Chinese builder, Shimao Group Holdings Ltd., is circulating draft restructuring offers to advisers of an ad-hoc bondholder group. \r\n \r\n "

"A 1.5trn debt wall is looming for US commercial properties\u00a0"

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