Future Trends in the Real Estate Market
In this segment Tom Fink discusses the estimated upcoming commercial real estate debt maturities with annual maturities by lender type. It demonstrates that there is still around $1 trillion of debt coming due from 2015 to 2017.
The last 3 years have shown a continued erosion of the amount that’s due in 2016 and 2017 as people pre-pay loans, as properties get sold and as distressed debt works out. There is a wall of maturity coming, in excess of $100M dollars, but the market has demonstrated the resilience to be able to address that and carry forward even in light of that coming volume.
Aaron Kaiser:Hello, I'm Aaron Kaiser, partner at EisnerAmper and Co-Chair of our firm's Real Estate Practice. It's my pleasure today to introduce Tom Fink Senior Vice President and Managing Director of Trepp LLC. Trepp was founded in 1979 and is the leading provider of information analytics and technology to the commercial mortgage, backed securities, commercial real estate and banking markets. Welcome, put on your Swami hat and tell us what you think is going to happen in the future, particularly going forward. It's a lot of maturities coming forward with that market.
Tom Fink:Well, Aaron, as you can see from the chart, we've graphed the upcoming maturities as we best get estimate them at both CMBS banking and the other markets that are picked capital providers and you can see we still are facing somewhere around a trillion dollars of debt coming due 2015 to 2017.
Among the banking, the CMBS markets are the two big contributors to that. The fact of the matter is that we have been already putting a big dent in that market because this year alone. For example, with $100 million dollars to CMBS that's being done, there was only about $60 billion of CMBS maturing, so we have been seeing over the last three years a continued erosion of the amount that's due in 16 and 17 as people pre-pay loans as properties get sold as distressed at works out. So, yes, there is a wall of maturity coming. Yes, it's an excess of $100 million dollars, but I think the market has demonstrated the resilience to be able to address that carry forward even in light of that volume.
Aaron Kaiser:Tom, thank you very much for your insights and thought leadership.
Tom Fink:Aaron, it was my pleasure. I always liked working with you and the folks at EisnerAmper.
Aaron Kaiser:Thank you so much. For more information go to EisnerAmper.com.
What role are government-sponsored organizations playing in the real estate market today? Tom Fink stresses that government-sponsored agencies are still very important factors in today’s real estate marketplace.
What is the change in the level of non-performing debt and which way is the trend going? Tom Fink discusses the delinquency severity breakdown, saying “we’ve seen a real decline in the overall level of delinquencies in the market.”
How is the New York metropolitan real estate investment market doing? Tom Fink discusses the tri-state area commercial mortgage-backed security delinquency rates. It shows that New York State is outperforming its cohorts in NJ and PA.
Would a rise in interest rates affect the coming wall of maturities? Tom Fink states that if interest rates were to go up substantially that would provide an issue for the marketplace because of the uncertainty of the volatility.
In terms of safety and risk, what trends can be seen in the different lending classes? Tom Fink thinks credit standards have loosened over the last two to three years as more money becomes available and borrowers get better terms and conditions.
After discussing New York, Tom Fink discusses markets around the world from an equity perspective and how there's an awful lot of money is still available for pursuing equity investments in real estates around the globe in terms of debt.
The New York real estate market is doing relatively well. How is New York doing compared to the country as a whole? Tom Fink illustrates by showing the nation sectioned into regions and shows the delinquency rate in each region.
When asked about the important emerging technologies in the marketplace, Tom Fink replies, “I think we still have a long way to go before technology is really a factor in the commercial real estate market space. But, I think it’s still an exciting time”.
The real estate industry has made a strong rebound since 2009 – it’s healthy, back on its feet and active. Rates continue to be at a historic low and there is still a huge amount of stimulus outstanding.