Non Performing Debt
What is the change in the level of non-performing debt and which way is the trend going? As Fink discusses the delinquency severity breakdown, he says “we’ve seen a real decline in the overall level of delinquencies in terms of the volume of the loans that are considered delinquent in the market.” He states that it’s encouraging that the 30 day rate is currently really low.
“We have very few loans that are going delinquent today. The flip side is that in the REO space we’re still trying to resolve some of these very troubled assets.” He acknowledges that some of these have already generated big losses for the commercial mortgage-backed security market and they will continue to generate losses. Even though the market as a whole is active and has healed, there is still going to be a tail wind or “drag” of REO properties as also seen in the residential market.
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 back securities, commercial real estate and banking markets. Welcome. So this all sounds pretty good, Tom, so let me ask you, have you seen much, has there been much change in the level of non-performing debt? Which way is the trend going in, and how do we see that working out going forward?
Tom Fink:Well, Aaron, again that you can see from the chart that we put together on delinquency severity breakdown.
We've seen a real decline in the overall level of delinquencies in terms of the volume of loans that are considered delinquent in the market. I think when you look at this, the encouraging thing is the 30 day rate is really low these days, so we have very few loans that are going to Lincoln's today. The flip side is that in the REO space, we're still trying to resolve some of these very troubled assets and some of these have already generated big losses for the CMBS market and they will continue to generate losses. So even though the market as a whole, as I said earlier, is active, I think things have healed, but I think we're still going to have this tailwind, this drag of REO properties just like we have in the residential market.
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.
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”.
Tom Fink discusses the estimated upcoming commercial real estate debt maturities with annual maturities by lender type. The last 3 years have shown a continued erosion of the amount that’s due in 2016 and 2017 as people pre-pay loans.
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.