As worries continue to spread about rising delinquency rates in the commercial real estate sector, lending institutions around the country are quietly trying to dispose of commercial loans. In April, DebtX, a Boston-based full-service loan sale advisor, brought to market a $380 million commercial loan portfolio, of which $45 million was made up of loans on retail properties. The retail loans belong to a bank that's trying to reposition its portfolio due to an acquisition, says Kingsley Greenland, DebtX CEO.
The portfolio received a fair amount of interest from buyers in the secondary whole loan market, according to Greenland, but he notes that prices on such offerings will probably be lower than last year — by about 10 percent to 20 percent.
“I think in the commercial loan market, you've got a lot of people concerned about problematic valuations on deals from the past few years, especially those from 2006 and the first half of 2007,” says Matthew Anderson, partner with Foresight Analytics. “In the CMBS market, you have $40 billion to $50 billion deals that are maturing in 2008, and a good chunk of that is likely to be problematic loans.”
As a result, the volume of commercial loans put on the market is likely to double this year compared to 2007, notes Greenland. His firm has already seen an increase in loan offerings from the Southeast, where developers who have bought land have been unable to secure tenants. In the next couple of months, similar problems will start affecting California, he predicts.