The large amount of maturing mortgage debt is an opportunity for institutional investors to acquire at good prices commercial real estate from sellers who are overleveraged, a report from a unit of BNY Mellon Asset Management declares.
"The ability to acquire these properties at attractive costs is possible because of the significant amount of commercial real estate debt that is scheduled to mature over the next four years," said David Blum, managing director, portfolio management, at Urdang Capital Management and a co-author of the report.
"Many of these properties have experienced deferred capital expenditures, which will require owners to invest additional equity or dispose of their assets."
Another reason why owners might have to come up with additional equity when they go to refi is because of the drop in values from the market peak.
"This gives new investors the opportunity to have a lower cost basis than those who bought similar properties a few years ago, providing them with the ability to offer lower rental rates than comparable properties with greater debt burdens."
Furthermore, added the other co-author, David Rabin, managing director, private real estate, because commercial mortgage-backed securities delinquencies are at an all-time high, there will be "increasing opportunities" to purchase properties at an attractive price.
