The Great Wall of CRE
There is a massive CRE debt wall that has been built, and it looks very scarry. This wall is newsworthy because it hasn’t previously been reported how massive the wall is. Last week, Mortgage Bankers Association released a report entitled “Commercial Real Estate Survey of Loan Maturity Volumes,” which shows $930B of CRE loans are now scheduled to mature in 2024. This figure is ~70% higher vs. $544B of CRE loans previously reported by Bloomberg/Trepp data. The bar chart (below) shows the reported CRE debt maturity wall reported 1 year ago.
So how did the 2024 maturity wall grow so massively? That is my question of the day.
You are correct if you answered “extensions.” That’s right, old-fashioned kick the can down the road is why a huge cohort of the 2023 CRE maturing loans slipped into the 2024 maturity cohort. Amend and Extend and Pretend has become the key to avoiding default and that’s exactly what many CRE owners/operators have done, with the willing help of the lender. In all my years, I have never seen such a massive absolute number or percentage of maturities amended and extended.
A total of $5.6T CRE debt matures in the next decade. Banks are the largest lender, accounting for 50% of all CRE debt, followed by CMBS market, which has securitized over $1T in CMBS loans. The opportunity to work with banks on asset sales & capital solutions; to buy CMBS dislocation, the fallen angels as rating downgrades occur and to provide fresh loans at the new valuation reset is what many of us are focused on. 2024-2025 will likely prove to be the period that determines which loans will pay off, which will be restructured, and which will have a hard default.
The Great Wall of CRE: 2024 has grown to $930B according to MBA!