(The following statement was released by the rating agency)
July 02 - A wave of commercial property loans will mature in July and Fitch expects most of these to fail to repay investors due to a lack of refinancing options. The problems of refinancing commercial real estate loans were highlighted last week when Commerzbank, the largest CRE lender in Germany, announced it was pulling out of the business. A total of EUR2.5bn of outstanding loans in European CMBS transactions falls due this month versus none in June and one loan in May.
About 40% of commercial property loans in European CMBS transactions have had their maturities extended, with only 15% paying investors in full at maturity and another 14% having now paid investors at some point after the original maturity. That statistic holds for the loans maturing this month. Of the 32 loans maturing, 13 have already had their maturities extended.
In this batch of loan maturities there are two pools of loans that will find refinancing particularly difficult. The first is a group of five loans that are in transactions that need to repay their bond investors in 2014, and therefore whose time is running out. It is increasingly likely that the servicer will sell the properties to repay the loan. The short timeframe will put additional pressure on the servicers working out the loans.
Large loans - and there are 10 over EUR100m - will also find it hard to refinance because of the banks’ waning risk appetite. The largest is a German retail loan with EUR380m outstanding. This is in a transaction backed by eight loans, six of which have already defaulted. This loan, and the one other not in a formal default, both failed to repay at their original scheduled maturity but have subsequently been restructured with rolling 12-month loan extensions. These loans are over-leveraged and unlikely to refinance without a large equity injection.
The other loans maturing in July can be worked out over a longer period because the CMBS bond holders do not have to be repaid until between 2016 and 2020. This increases the chance that the maturities of these loans will be extended for at least another year.