The stricter lending requirements in the current environment will spell trouble for some of the $346 billion in CMBS loans slated to mature between 2014 and 2017, according to Trepp.
Maturities in CMBS loans are expected to peak at $113 billion in 2016 and it is unlikely that the market will readily absorb loans structured with higher loan to values. A higher LTV ration means more debt, less equity and increase risk.
According to Trepp, loans originated 2004 and 2005, were structured with less borrower equity compared to those originated in 2006 and 2007. The majority of these loans have ten-year terms.
Retail loans are likely to have the most difficult refinancing without requiring additional equity to be raised. According to Trepp the LTV ratio for loans maturing between 2014 and 2014 is consistently higher than those of recently originated loans. “In almost every region of the country, retail borrowers will find it difficult to meet current LTV requirement when refinancing maturing loans,” said Trepp.
Multifamily loans will fare better at refinancing. That is because the loans are typically structured with much lower LTVs. In the lodging sector, borrowers looking to refinancing are also expected to meet LTV requirement in 2014 and 2015. “It is not until 2016 and 2017 that borrowers may need to inject more equity to meet current underwriting standards,” said Trepp.
In the office sector, Trepp said that loans maturing in 2014 will face little trouble refinancing because “current LTV ratios are higher than those of maturing loans." However between 2015 and 2017, LTVs on maturing loans wil exceed those of new loans in all US regions.
