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CRE Extend and Pretend

By Anonymous

From David Levitt at Bloomberg: U.S. Commercial Property Sales Trail Six-Year Average (ht Mike in Long Island)

In top cities such as New York and Washington, owners who owe more than their properties are worth are instead finding new sources of equity and lenders are willing to restructure their loans, [Sam Chandan, Real Capital?s chief economist] said. In less attractive markets, banks have been extending loans, waiting for higher prices so they don?t record losses ...

From Carriick Mollenkamp and Lingling Wei at the WSJ: To Fix Sour Property Deals, Lenders 'Extend and Pretend'

A big push by banks in recent months to modify [commercial real-estate] loans?by stretching out maturities or allowing below-market interest rates?has slowed a spike in defaults. It also has helped preserve banks' capital, by keeping some dicey loans classified as "performing" and thus minimizing the amount of cash banks must set aside in reserves for future losses.

Restructurings of nonresidential loans stood at $23.9 billion at the end of the first quarter, more than three times the level a year earlier and seven times the level two years earlier

With office vacancy rates at a 17 year high, and mall vacancy rates at a 19 year high, there is going to be a long wait ...

Full post as published by Calculated Risk on July 08, 2010 (boomark / email).