Aron Youngerwood
Lucrum Realty
Last month, the distress rate on CRE loans spiked to a historic high of 8.35% (according to CRED IQ). Multifamily was the big driver - most noticeably the default on the $1.75 billion loan linked to Parkmerced, a vast multifamily property in San Francisco. This loan's transfer to a special servicer due to imminent non-monetary default highlighted the underlying issues in the multifamily sector.
Office, retail and hotels also saw large increases in distress rates, while industrial and self-storage sectors remained relatively stable. Â At Lucrum, our debt advisory team have successfully represented borrowers in modifying over $1 billion of commercial real estate loans, including for office, hotels, multifamily, student housing, senior living, medical centers and retail properties.
The looming challenge now is the wave of upcoming loan maturities, with nearly $2 trillion in CRE loans maturing within the next 3 years. Despite expectations that many of these loans will be extended into 2025 and beyond, significant defaults are anticipated, particularly in the office and multifamily sectors. This situation is compounded by subdued bank lending as financial institutions seek to mitigate risks, wary of potential large-scale deposit withdrawals and regulatory concerns about solvency.
Today, the big question is what will lenders do with these maturing loans? From talking to many of our lenders, their calculus has been that interest rates would come down and make refinancing possible, but how many cuts, and their total, the Federal Reserve might provide is unknown. Now is the time for lenders to consider more tailored and reasonable loan modifications that will allow the property to survive without the lender taking a large loss. With nearly $1 billion in loans maturing in 2024 and the Federal Reserve's future interest rate cuts unclear, the industry faces a critical period.
The Lucrum Team have successfully obtained a number of loan extensions, modified rate cap and escrow requirements, as well reductions of interest rate spreads and other debt relief for clients.
About Lucrum Realty
Lucrum Realty (www.lucrumrealty.com) represents borrowers by providing loan advisory, loan modification and restructuring services for borrowers. The Lucrum team includes former special servicers, lenders and restructuring experts.
Please call a member of our team if we can assist you or your clients.
Aron Youngerwood
Tel: 310-785-9491
Joseph Savitsky
Tel: 212-871-8953
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