Blackstone is selling commercial mortgage debt to finance its planned $10 billion acquisition of apartment operator AIR Communities. https://t.co/sQGxLglotg
— Mortgage Professional America Magazine (@MPAMagazineUS) July 12, 2024
Horn said the current trickle of refinancings is expected to expand into a “tsunami” as the year progresses, and loans being modified in 2023 are also scheduled to be added to the regular flow of needed refinancings.[At the] “We expect the end of the year to be very busy on the commercial lending side, starting at the end of the fourth quarter of 2024 and going into all of 2025,” he said.
High quality deals, where the sponsor has a deep and productive relationship with the banking institution, are usually safer for the borrower as banks are more flexible with such loan types.
What type of commercial loan is safest right now?
But what's interesting about the current market is that the second type of deal that offers the most flexibility is the lowest tier deal. “The worst deals on the balance sheet are the ones where you're actually getting the same amount of flexibility,” Horn says, “because institutions don't want to realize losses on selling those.”
“So the really bad deals are actually staying on the books longer. So what's getting squeezed and really getting pushed out are the deals that are performing well – deals that are slightly below their expected debt yields or that are maturing.”
He said a sort of “duopoly” was emerging, with the worst deals staying on balance sheets longer and the middle-of-the-road, reasonably well-performing deals getting pushed out.