According to Trepp, 2007 marked the year that commercial real estate values and the surrounding euphoria peaked. In the five years since, investors have spent countless nights fretting about the weak underwriting, optimistic revenue forecasts and inflated values tied to these loans. Prevailing wisdom indicated that the default rate would be high and many of the loans would struggle to refinance. Now that 2012 is half over, we can see how these loans have fared. For the most part, their performance has met investors’ dismal expectations.
Almost 13% of the loans were paid off prior to their maturity date. Another 15% paid off at the balloon date or in the months after the maturity date. Therefore, only about 28% of the Class of 2007 loans paid off in full. The Class of 2007 loans that matured in the first half of 2012 in its entirety looks like this:
|Total Balance of Loans: $18.6 billion|
|Paid Off at Balloon:|
|Still Outstanding (includes extended loans): 60.98%|