With improvements to the economy, we are also seeing higher interest rates on commercial mortgages. Certain commentators seem to be suggesting that interest rates will continue to increase during the next few years. The Federal Reserve has sent out messages that it would be slowing its bond acquisition program. This could be interpreted as meaning agency officials are also willing to increase interest rates.
Commercial Real Estate Archives
Two real estate fund managers have purchased non-performing loans containing a balance of close to $200 million. This would include loans on 300 commercial real estate properties.
One real estate investment firm recently closed on over $140 million of note purchase and financing transactions during the third quarter of 2013. Madison Realty Capital’s strategy is to take on first mortgage loans along with a number of non-performing loans as well.
Two investment groups have formed a joint venture concerning originating loans of $5 million to $15 million against a variety of asset types across the United States. Carlyle Group and Canopy Investment Advisors LLC both already have a history of investing in commercial real estate debt.
Private real-estate fund managers have been spending billions of dollars on investments in recent months. What may surprise some readers, however, is how much of the investment strategy has been focused in upon debt.
We are once again seeing businesses test the market by providing a variety of debt offerings that have not been seen since before the economic downturn in 2007. It now appears that Blackstone is making a public offering in the amount of $13.5 billion regarding the refinancing of Hilton Hotel Corps, one of the largest hotel chains in the world. At least $3.5 billion of that public offering will include commercial mortgage-backed securities.
There is not likely going to be any shortage of commercial debt either in California or across the United States during the coming years. Though the housing sector appears to be on its way towards recovery, there is a great deal of commercial real estate debt that will likely come due during the next five years. It is believed that as much as $1.7 trillion in commercial real estate loans are anticipated to be due from now until 2018.
Though regulators have cracked down upon the selling of consumer loans by banks to other entities, the sale of commercial loans to other businesses has continued. For better or worse, there is no shortage of bad loans that will need to be dealt with by the banks.
Though consumer debts owed to a business are often a minor matter that can easily be written off, the inability to collect upon a commercial debt can lead to a significant reduction of profit for a business. For example, one real estate developer in the building trade now is said to owe more than $100 million in debts to a number of competing creditors.
Debtors only have so many legal options available to them in attempting to protect assets from being available to creditors should the debtor be behind in their payments. California law makes it a crime for debtors to conduct themselves in such a matter that would defeat the rights of creditors. This is particularly true if the conduct would in effect "defraud, hinder or delay" a creditor.