Commercial Real Estate Veteran Expects a Wave of Distressed Property Asset Sales Comparable to early-1990s and post-GFC
Over time and without normal rental income, property owners can lose the ability to make mortgage payments and cover operational expenses.
NEW YORK, Aug. 05, 2020 (GLOBE NEWSWIRE) -- NAI Global President & CEO Jay Olshonsky, FRICS, SIOR, CCIM is expecting a wave of distressed commercial real estate assets to come to market in the next 9-18 months.
The challenge property owners’ currently face is the ability to collect rent from existing tenants and attract new tenants to the vacant space in their buildings, especially in the face of collapsing businesses and the rise in bankruptcy filings. Over time and without normal rental income, property owners can lose the ability to make mortgage payments and cover operational expenses. That becomes the inflection point in which lenders take control of their properties, hire special servicing companies and sell assets under duress. The situation is most dire for hotels and resorts, retail properties and retail-weighted mixed-use properties, though office properties are likely to be negatively affected in this cycle and part of the wave. Many companies have not re-occupied their offices and for most of those that have, occupancy is not at pre-Covid-19 levels.
According to Trepp data procured by NAI Global, delinquency rates on CMBS-based loans spiked in May of this year to 7.16% of total outstanding loans, from 2.33% in April. In June, the CMBS delinquency rate on loans backed by these securities jumped to 10.32%, which is a 748 basis point rise from one year ago when the delinquency rate was 2.84%. The June delinquency rate is very close to the recent high of 10.34% in July 2012, the peak of the post-GFC bust, and commercial mortgage default rate could be headed higher in July and August.
CMBS loans are considered a benchmark of the commercial mortgage lending market as those types of loans account for approximately 20% of total loans on commercial properties.
NAI Global is a leading global commercial real estate brokerage firm with more than 375 offices worldwide (140+ in the U.S.) and annually completes in excess of $20 billion in commercial real estate transactions, many of which have been distressed property sales.
NAI Global is receivership ready with extensive special-servicing experience. The firm has sold $6.4 billion in real estate assets on behalf of special servicer clients, including over 800 bank-owned (REO) transactions, 100+ note sales, 271 office properties, 337 retail properties, 95 hotel properties, 128 multifamily properties and managed over 300 auctions. Groups served by NAI Global’s Receivership Practice Leaders: banks, lenders, financial institutions, bankruptcy attorneys and firms, including professionals that specialize in restructuring and reorganizing business operations for clients.
Contact NAI Global President & CEO Jay Olshonsky for more information on the expected increase in distressed real estate asset sales.
Tel: +1 212 405 2499
E: [email protected]