News Digest: US commercial real estate debt refinancing under a cloud
April 13, 2023
A new report by Morgan Stanley has noted that the $1.5 trillion US commercial real estate debt could face severe refinancing pressure when they become due for repayment before end-2025. This could result in property valuations falling by as much as 40% from its peak.
The challenge becomes deeper as the small and regional banks, which were the biggest source of credit to the industry in 2022, have seen depositors pulling out post the Silicon Valley Bank crisis. This could severely curtail their ability to refinance the debts.
The note says maturities would continue moving north for the next four years, peaking at $550 billion in 2027. Rising interest rates and default worries have already started hurting the commercial mortgage-backed securities bonds market at this time. Sale of securities without government backing fell nearly 80% during January-March, says Bloomberg news.