Market Extra: More office zombies? Only 11% of maturing loans repay in September, Moody’s Analytics says

by | Oct 26, 2023 | Stock Market

New financing for old office loans that Wall Street packed into bond deals years ago has been getting more scarce, according to Moody’s Analytics. It’s another troubling sign for commercial property markets, with only 11.1% of office loans out of a near $755 million pile of maturing debt repaying in September, when looking at landlords with Wall Street funding from the commercial mortgage-backed securities market.

Landlords typically rely on the sector to keep refinancing their debt, rather than repaying all of what they owe. Building owners aim to earn a return while staying current. But if they can’t refinance, defaults typically rise, sparking the kind of fire sales hitting San Francisco and other big cities, which potentially can spur more borrowers to surrender buildings to their lenders instead of standing by struggling properties. “September did have a slightly higher payoff rate than July or August,” said Matt Reidy, director of commercial real estate economics at Moody’s Analytics, in an email to MarketWatch. But he also said loan repayments in recent months “were very, very low.” Payoff rates have been grim for months, with many landlords instead relying on loan extensions or modifications to stay current as higher interest rates and falling values erode the chance of buildings refinancing. Office availability rates in the …

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