It’s unlikely that Blondie was referring to real estate investors in her 1980 anthem “The Tide is High,” but for many real estate investors that are struggling to refinance loans in a higher rate environment, the water is awfully high.
According to Trepp, LLC, a New York based data analytics firm, there are $300 billion of Freddie Mac and CMBS loans (Collateralized Mortgage Backed Securities) coming due in the next 24 months. Of those, 42% would be cash-in refinances and of the 42%, half would require cash in of more than 25% of the loan balance.
Familiar properties to many both in and out of real estate are struggling with values that have fallen and rates that have risen. For instance, according to Trepp, the owner of Willis Tower, which was the tallest building in the world for 25 years as the Sears Tower, has requested a 5th and final extension of their maturing $1.325 billion loan. Trepp’s analysis would have the borrowers paydown the loan by 30% to right size it.
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The $1.386 billion Mall of America is maturing next year and has been operating under a modification since COVID. Current interest rates and reported NOI at the property wouldn’t support a loan of the same amount. Another iconic property, the Hotel del Coronado, which backs a $950 million loan is on the servicer’s watchlist because the debt service coverage ratio has fallen to .77X.
While it is no great surprise that some properties are struggling to pay their mortgages, the pain has been relatively muted and has not spread to the larger economy. Despite 10% of CMBS loans backed by office (10.04%) and retail (9.81%) being in special servicing, the CMBS lending engine is actually revving up.
Recent bond pricing for loans that are originated by conduits and sold as CMBS have tightened dramatically which has given hope to borrowers that are struggling to attract capital from banks and insurance companies.
According to the recent lender surveys, pricing on new 10-year loans ranges from 6.50% to 6.75% with conduits. Multifamily loans from Fannie Mae and Freddie Mac price in the 5.75% to 6% range and loans from life insurance companies are as low as 5.75% for the best loans. Banks continue to be somewhat careful and selective with pricing in the 6.50% to 7% range on stabilized deals but pushing 8% on floating rate construction deals.
Much like volatility in the stock market in 2008 put light on the fraud committed by Bernie Madoff, Commercial Mortgage Alert reports that one borrower out of Monsey, NY has accounted for 61% of the defaulted loans for all of Fannie Mae.
The borrower is affiliated with Weiss Property Group. On at least one loan, a borrower allegedly cashed out of several properties within months of purchasing them by inflating the values to Fannie Mae so they could borrow amounts higher than the original purchase price.
Despite values that have softened and oversupply in some markets, multifamily continues to enjoy its status as the best property to lend on. In Richmond, that trend should continue according to data from Rent Café. Richmond ranked 11th in the country and 4th in the South for rental activity in February with a whopping 76% increase in page views when compared to the same month last year.
From the Archives: 27 photos of Willow Lawn
04-22-1965 (cutline): Willow Lawn took on a French look today as the shopping center opened its second annual April-in-Paris sales promotion, which will run through Saturday. Beverly Brookshire, an RPI student from Winton, N.C. waits on (left to right) Yves Kob, director of special events for the French government tourist bureau; State Sen. E.E. Willey; Mrs. Mary C. Hankins, president of the Willow Lawn Retail Merchants Association, and Jean-Marie Delacourt of French Lines.
Carl Lynn
04-22-1966 (cutline):Willow Lawn opened its three-day April in Paris festival yesterday. Among those who helped open the festival with colorful ceremonies on the Willow Lawn Mall were (from left); State Sen. E.E. Willey, Mary Tom Montgomery of Norfolk, who is Miss Virginia, and Yvon Lavaud, commercial counselor from the French embassy.
Staff photo
12-24-1964 (cutline): The third floor being added to Miller & Rhoads store int he Willow Lawn shopping center is taking shape above the existing store, extending over the S&W Cafeteria as well as over the present store building, has an area of about 28,000 square feet. Construction is due to be completed by next fall.
Staff photo
03-17-1987 (cutline):Tony Johnson sweeps up the mall near Miller & Rhoads in the remodeled Shops at Willow Lawn.
Don Long
04-02-1987: Willow Lawn Mall
Staff photo
04-01-1987 (cutline): The Shops at Willow Lawn made an impressive debut and put out an equally impressive spread last night at a preview galas to benefit Maymont’s Adopt-A-Living-Thing program. Most of the 115 stores will open today.
Staff photo
10-20-1987: Willow Lawn Mall
Lindy Keast Rodman
11-08-1957 (cutline): Against a background of modern sculpture in the mall, Willow Lawn executives plan sales promotions for the second year of the shopping center’s operation. They are (left to right) John Massey of Galeski Photo Center, Vincent M. Montsinger Jr. of Merchants association and John Giesel of G.C. Murphy’s.
Staff photo
02-02-1977: Willow Lawn
Carl Lynn
03-03-1961: Willow Lawn Shopping Center
Staff photo
06-03-1966 (cutline): These large box culverts are presently being constructed in Jordan’s Branch just west of Willown Lawn Shopping Center as part of an over-all project to deepen and widen the flood-prone waterway. Although the work is being performed in the county, the city is bearing the major part of the cost and directly the project because most of the water that runs through the drainage facility in this area come from the city. The entire project will cost an estimated $275,000. The county has appropriated $75,000 and the city is financing the rest of the work.
Staff photo
11-08-1956 (cutline): Here’s how part of the Willow Lawn shopping center looks to a shopper walking north. At right is Dell’s, a record-magazine store. Other stores are Giant Food, G.C. Murphy variety store, Jacobs & Levy clothing store and Advance, automobile supply firm.
Staff photo
01-16-1957 (cutline): View of the J.C. Penney Co. opening tomorrow at Willow Lawn Shopping Center.
Staff photo
11-08-1956 (cutline): First in Richmond–Giant Food Stores’ first Richmond outlet is this 18,000-square-foot building in the Willow Lawn shopping center. The grocery has been open since September.
Staff photo
12-26-1962: Willow Lawn.
Staff photo
11-08-1956 (cutline): Abstract Centerpiece–Wolfgang Behl, formerly of Richmond, was the sculpter of this fiberglass centerpiece, the feature of the mall at the Willow Lawn shopping center. The mall, in the center f the 40-acre project, is framed by Japanese holly.
Staff photo
04-02-1987 (cutline): A crowd fills the food court atrium, where shoppers will be able to pick and choose.
Don Long
10-11-1988: Willow Lawn
Gary Burns
01-30-1990 (cutine): New Look–The finishing touches are being added to the Willow Lawn Theater, which reopens Friday with four screens, two auditoriums on an upper level and two below.
Gary Burns
10-13-1988 (cutline): Renovation of The Shops at Willow Lawn has been named project of the year by Richmond Real Estate Group, an association of about 60 commercial real estate executives. The award, presented last night, cited the $20 million refurbishing of the 32-year-old shopping center for its impact on the real estate community and area. The International Council of Shopping Centers also has cited the mall renovation as one of the nation’s top projects.
Gary Burns
04-02-1987: Willow Lawn Grand Opening.
Lindy Keast Rodman
12-18-1985 (cutline): New signs, overhang are early part of $9 million face lift for shopping center.
Gary Burns
04-02-1987: Willow Lawn Grand Opening.
Lindy Keast Rodman
03-16-1987: Williow Lawn renovation.
Don Long
03-16-1987 (cutline): Willow Lawn renovation food court.
Don Long
03-16-1987 (cutline): Willow Lawn renovation.
Don Long
1960 Photo of Willow Lawn area.
UNKNOW
Andy Little at Queenswood Partners can be reached at (804) 301-3985.