The majority of maturing loans were 10-year fixed-rate loans with the highest concentration in the 1997 through 1999 vintages. By property type, 927 loans backed by multifamily assets experienced the most refinance activity with $5 billion (23%) refinanced during the last eight months. This was followed by 744 retail loans at $4.7 billion (22%), 218 hotel loans at $4.5 billion (21.2%) and 449 office loans at $3.3 billion (15.6%).
The geographic concentration of recent maturities is similar to that of most CMBS transactions. By state the maturities were concentrated with $3.7 billion in New York (18%), $3.3 billion in California (15.4%), $1.9 billion in Florida (9%), and $1.6 billion in Texas (7.8%).
"The diversity of property type and geographic distribution of recent refinancing activity shows that debt capital is still widely available for commercial real estate," said Susan Merrick, Managing Director and head of U.S. CMBS for Fitch Ratings. Fitch found that low leverage and high existing coupons contributed to the ability of loans to refinance in a more restrictive lending environment. New lenders are typically insurance companies and regional banks.
Fitch noted that refinancing activity has continued at a strong and steady pace in 2008 as demonstrated by the successful payoff of 1,273 loans during the first two months of the year. "The fact that $8.2 billion of U.S. CMBS loans have already refinanced this year shows the commercial real estate market debt continues to function so far this year," said Senior Director Adam Fox. Fitch expects that the $28.5 billion CMBS fixed-rate loans coming due in the balance of 2008 in the transactions it monitors will continue to be easily refinanced.
Fitch identified 58 non-performing U.S. CMBS loans with an outstanding balance of $231.3 million that have passed their maturity without full payoffs since Jan. 1, 2008. In total, only 1% by dollar balance of these scheduled maturities have become non-performing. Historically, in these cases Fitch has observed that borrowers often work with servicers to pay off their loans within 30-to-60 days. The majority of these non-performing loans are backed by traditional asset types such as retail (37%) and multifamily (33%) properties. The largest non-performing loan of the 58 in question was a $28 million loan secured by a group of cross-collateralized and cross-defaulted multifamily properties in North Carolina in the DLJ 1998-CF1 transaction. The loan was scheduled to mature on Jan. 1, 2008 and paid off in full on Feb. 29, 2008 without a principal loss to the trust.
"While the capital market lenders are not active sources of capital for commercial real estate properties today, the level of refinance activity for maturing CMBS loans shows that other lenders are willing and able to provide capital to these properties," said Merrick.
