The Mayans had it right.  2012 may be the end of the world – at least the Commercial Mortgage Backed Securities (CMBS) world, with a high probability commercial banks will also be caught up in the re-financing crunch.  Many loans made on commercial real estate properties (CRE) in 2007 (near the top of the bubble) had 5 year balloon payments and many of these loans may come to maturity in 2012.

Refinancing Commercial Real Estate Debt

Refinancing CRE properties today may not be easy.  Lenders at the height of the bubble relied on rental income streams that were substantially higher (in many cases) than today’s rents.  Vacancy rates were also lower then and buyers were looking at purchase using cap rates that seem like part of a different world than we live in now.

Many properties today will have values significantly lower than they did in “the old days”.  Some are underwater.  Some may be worth more than the loan but not by much. Some may already be in or facing foreclosure. CMBS are coming back slowly but underwritten with much more caution than 5 year ago.  The same thing can be said for commercial banks and life companies.

Part 2 coming soon…

This blog was written by [google_authorship] Amter , President of Montegra Capital Resources, LTD., a Colorado hard money lender. Bob has been in the private capital lending business for 41 consecutive years.