Return-Path: Delivered-To: andrew@sterlingcal.com Received: from reseller401.webserversystems.com by reseller401.webserversystems.com with LMTP id qF8cLNw7FGbejA4AchKAPA (envelope-from ) for ; Mon, 08 Apr 2024 13:47:56 -0500 Return-path: Envelope-to: andrew@sterlingcal.com Delivery-date: Mon, 08 Apr 2024 13:47:56 -0500 Received: from o13.ptr1224.officeinteractive.com ([168.245.9.66]:27292) by reseller401.webserversystems.com with esmtps (TLS1.2) tls TLS_ECDHE_RSA_WITH_AES_128_GCM_SHA256 (Exim 4.96.2) (envelope-from ) id 1rtu28-00402q-04 for andrew@sterlingcal.com; Mon, 08 Apr 2024 13:47:56 -0500 DKIM-Signature: v=1; a=rsa-sha256; c=relaxed/relaxed; d=jefftaborgroup.com; h=content-type:from:mime-version:subject:to:cc:content-type:from: subject:to; s=s1; bh=MzpMmo8M9NUjKC+e1A6x3XcftEO5L/YvGd4vX1E6CSQ=; b=sqO9QXAtmtpFsV4BzfkTUbJXHaDM+9BuDsSv+YW8CgsjNM29w3LX2ZRNLTxHeBR7ePbV MiYLQdw4utGEbLaUIuvjOCJz4KsljFdWXH4U35ky3KSwpGcAFF4QY4RZHaAXuXo6FXVefE Giwbg/Y8VQ2F4cpjByM4zy/5/fsaemumeAWrv8zN+rQm8cHLZeMWvE2Q6q+d0/BYhG2uMv Q3Ud13zOBEw5bXJ8FOHxNNM12gQZ5iFP7txDOAA8/qRxtHzQBRHIldaxNwbfZsWcHAqIj9 eQ77/O2VppAXTEdaFeIF2RC0SI6nOeMsBZ9SbT1FAxvDUDpigwiVcAm7Ybudo70g== Received: by recvd-d98d7c8b-v472m with SMTP id recvd-d98d7c8b-v472m-1-66143BCF-E 2024-04-08 18:47:43.844128286 +0000 UTC m=+348861.379085569 Received: from MjEzMTA1MDQ (unknown) by geopod-ismtpd-27 (SG) with HTTP id t6ymEdEzQCOqV311EON9Ig for ; Mon, 08 Apr 2024 18:47:43.834 +0000 (UTC) Content-Type: multipart/alternative; boundary=709731c6a1a0bb34fa819ae27d14df18d1a4bb11d7fa69147ad8b1bc50ce Date: Mon, 08 Apr 2024 18:47:45 +0000 (UTC) From: Jeff Tabor Mime-Version: 1.0 Subject: Banks Stall Message-ID: X-SG-EID: =?us-ascii?Q?u001=2E6XgS+aMGExnB1bqZZrdrz9qzQEbZ7BEjpKh5guDijZ5HYu1dYAKq1tDEG?= =?us-ascii?Q?Tygo2l3bpRSrRRtQO=2FYwkK2RsxQ5Ib2G9VVERs3?= =?us-ascii?Q?uXQA+aBDNoNHCCoECDxS4knhk5wV=2F=2FX7gt9IqNh?= =?us-ascii?Q?gYXh8GjYbwXh6fHZQHyZmcYBSJtBr9m0Ew751HR?= =?us-ascii?Q?FKjzpYoL41Y12wHTctNV7kBy5X3kPDrJj8=2FkJao?= =?us-ascii?Q?x2nRBE7NdhpQJh1YZpZcy=2Fu4bUbGunlyiDIQ9uf?= =?us-ascii?Q?=2FFtc?= X-SG-ID: =?us-ascii?Q?u001=2ESdBcvi+Evd=2FbQef8eZF3BumkQkJshDt3i8OAiYeFCXmYpiyzg=2FCmmXCYe?= =?us-ascii?Q?KtfAIPaoZ9J70M+hRn1ho+SbW6X5a=2F=2FProIAge9?= =?us-ascii?Q?nkEOFAhjJxnqdUpwDMqBJ22Uf7ySJNjuUDuj8sM?= =?us-ascii?Q?B4QG2ti0vrzwg9Q=3D=3D?= To: Andrew Sterling X-Entity-ID: u001.hZHiB6kKM9UW5e2fAO4iNQ== X-Spam-Status: No, score=-0.7 X-Spam-Score: -6 X-Spam-Bar: / X-Spam-Flag: NO --709731c6a1a0bb34fa819ae27d14df18d1a4bb11d7fa69147ad8b1bc50ce Content-Transfer-Encoding: quoted-printable Content-Type: text/plain; charset=iso-8859-1 Mime-Version: 1.0

=20

Good morning, Andrew.

The below was in the Wall Street Journal this past Friday and I tho= ught you would discover it of interest. I did.

Banks are continuing to play the “extend and pretend”= game as it applies to their office building loans…which only means = one thing: It will also continue to be great to be a tenant in commercial l= ease negotiations for the next two years, at least!

I saw the following quote over the weekend…and I am s= ure you agree with it: “Success lies in relentless execut= ion of the basics.” When it comes time to hammering lan= dlords for more tenant concessions and less landlord rents, I am 100% a bel= iever!

Have a great week, Andrew!

<= p>Sincerely,

Banks Are Extending Office= Loans. Are They Also Pretending?

Many 20= 23 maturities were pushed into 2024, giving lenders more time for rates to = drop and other investors to come in

Pushing out the maturities of commercial real-e= state loans can be the right move.

Th= e looming “maturity wall” for commercial real-estate loans comi= ng due has been moved back, but it has also gotten taller.

Banks’ commercial real-estate loans are n= ow growing at an accelerating rate. In the first quarter of 2024 they grew = sequentially 1.2% on a seasonally adjusted basis, according to Federal Rese= rve data. This ended a slowdown in growth last year, which had fallen to 0.= 3% in the fourth quarter.

Inves= tors have been bracing for waves of loan maturities in commercial real esta= te, which could force a lot of tough choices about whether to restructure o= r write off mortgages to landlords struggling with occupancy and rental rat= es.

But it didn’t quite = play out as expected last year. MSCI Real Assets noted in a recent report t= hat $214 billion in mortgages slated for maturity in 2023 were, to their kn= owledge, not refinanced, nor was there a sale of the underlying property. &= ldquo;We believe that these loans have been granted some short-term extensi= on to their maturity date,” MSCI Real Assets wrote.

=
For banks, this phenomenon—which critics often d= ub “extend and pretend”—has added significantly to 2024 m= aturities. PGIM Real Estate, part of Prudential Financial’s asset- ma= nagement business, in a recent report noted that banks’ expected 2024= commercial real-estate maturities rose 35% from previous estimates. <= /span>
So for now, despite a sharp slowdown = in new commercial mortgage deals being originated last year, longer-lingeri= ng loans and prior obligations to lend to projects as they move forward are= sustaining banks’ lending volumes.
“Existing commitments keep funding up, and maturing loans = have nowhere to go,” wrote Autonomous Research analysts in a recent r= eport. They estimated that about 40% of banks’ CRE loans maturing thi= s year are actually ones that were supposed to mature in 2023. =
This is a good news-bad news situation. On = the one hand, loans aren’t being written off and losses crystallized.= But they also aren’t being paid off and resolved. The issue lingers = and forces investors to keep making calls about whether the loans will ulti= mately perform as banks are anticipating.
Large banks tracked by Autonomous have, at last report, set asid= e loan-loss reserves for their office portfolios worth about 8% of those lo= ans. That is roughly five times the median overall allowance level across a= ll loans.
How much cushion investors= demand will play a major role in whether bank stocks can keep pushing ahea= d after the KBW Nasdaq Bank Index’s 8% rally in March. Yet investors = don’t have much to go on. When it comes to commercial mortgages, trou= ble doesn’t necessarily manifest in the form of missed payments. Many= CRE loans are often structured with “balloon” payments, where = most of the principal is due at maturity.
In fact, the rate of delinquencies on banks’ CRE loans had ris= en to just 1.2% as of the fourth quarter of 2023—still a fraction of = the 8%-plus rate touched in the aftermath of the 2008 financial crisis, acc= ording to Fed data.
Instead, a key wa= y that banks work through them is to refinance them with new loans when the= y are due, or when property developers seek out permanent financing from an= other lender, often a nonbank.
So, as= unsatisfying as it may be, pushing out maturities can be the right answer.= For one, interest rates are set to fall, which may bring some relief for l= andlords struggling to raise rents sufficiently to pay for mortgages at tod= ay’s high rates.
Plus, it appea= rs that discount-seeking buyers and lenders seeking to jump on opportunitie= s may soon be ready to step up. PGIM Real Estate in its report wrote that t= here could be an “increasing role for alternative lenders.” Thi= s would especially be the case if banks need to be more mindful of their ca= pital and risk levels as new rules come into play.
The waiting game is no fun for invest= ors. But it might just be banks’ best move for now.
&nbs= p;

Jeffrey A. Tabor &nd= ash; Founder/CEO
Jeff@JeffTaborGroup.com
JeffTab= orGroup.com
(800) 507-6673
RE License # 01015287

C= onnect with me on LinkedIn: Jeffrey A. Tabor

If you would like to unsubsc= ribe, please click here

= Jeff Tabor Group=A0| 501 W. Broadway, Suite 800=A0| San Diego=A0| CA | 9210= 1

--709731c6a1a0bb34fa819ae27d14df18d1a4bb11d7fa69147ad8b1bc50ce Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset=iso-8859-1 Mime-Version: 1.0

=20

Good morning, Andrew.
The below was in the Wall Street Journal this past Friday and I tho= ught you would discover it of interest. I did.
Banks are continuing to play the “extend and pretend”= game as it applies to their office building loans…which only means = one thing: It will also continue to be great to be a tenant in commercial l= ease negotiations for the next two years, at least!
I saw the following quote over the weekend…and I am s= ure you agree with it: “Success lies in relentless execut= ion of the basics.” When it comes time to hammering lan= dlords for more tenant concessions and less landlord rents, I am 100% a bel= iever!
Have a great week, Andrew!
<= p>Sincerely,

Jeffrey A. Tabor – Founder/CEO
Jeff@Je= ffTaborGroup.com
JeffTaborGroup.com
(800) 507-6673RE License # 01015287

Connect with me on LinkedIn: <= a href=3D"http://url9120.jefftaborgroup.com/ls/click?upn=3Du001.CnneDJtL18c= 0KF7hpGsftiERcYijO7IApB-2BSlvZ-2FfkHwKCYmnpIH82aiRA8HdRT4LMtbsPLss6pyDwj0TQ= E68g-3D-3DIq73_QXnTW6f9jV7ots26-2Fd0iCGLOO4geXRd-2FVUltDSV-2BScFI09nRwiQVAR= Nn54-2BZEYodx4dw7jUpvurZZMoZvdLWtWurTduD2H9ApumH1srXTl9CoB7qT0YrTvbKHfmfBNt= pdQAt-2Fv2r5RtHhRj8cy6Pdu0Tnh5F3xs2f-2FbVSytEmD45D8HzN-2F5VyVMsVhW8beWzdbo8= GWME0Ax0GNHmF9qghZrXbgyr4OphjrnPaVtZoUymICH0RrtdB-2FdSSE3ebf-2B6rWvXRmbpWHQ= zI7dg2Fjx3BrboQzY-2FQKb98-2BN0yfcnbS2Yob1ZE4XcZwabPURgoeLsKUbCW8pv-2FqWHjuJ= AV6enQ-3D-3D" rel=3D"noopener noreferrer" style=3D"color:blue; text-decorat= ion:none;" target=3D"_blank">Jeffrey A. Tabor

Banks A= re Extending Office Loans. Are They Also Pretending?
= Many 2023 maturities were pushed into 2024, giving lenders more= time for rates to drop and other investors to come in
<= br>=

Pushing out the maturities of commercial r= eal-estate loans can be the right move.
The looming “maturity wall” for commercial real-estate loans= coming due has been moved back, but it has also gotten taller.
Banks’ commercial real-estate loans = are now growing at an accelerating rate. In the first quarter of 2024 they = grew sequentially 1.2% on a seasonally adjusted basis, according to Federal= Reserve data. This ended a slowdown in growth last year, which had fallen = to 0.3% in the fourth quarter.
= Investors have been bracing for waves of loan maturities in commercial real= estate, which could force a lot of tough choices about whether to restruct= ure or write off mortgages to landlords struggling with occupancy and renta= l rates.
But it didn’t qu= ite play out as expected last year. MSCI Real Assets noted in a recent repo= rt that $214 billion in mortgages slated for maturity in 2023 were, to thei= r knowledge, not refinanced, nor was there a sale of the underlying propert= y. “We believe that these loans have been granted some short-term ext= ension to their maturity date,” MSCI Real Assets wrote.=
For banks, this phenomenon—which critics oft= en dub “extend and pretend”—has added significantly to 20= 24 maturities. PGIM Real Estate, part of Prudential Financial’s asset= - management business, in a recent report noted that banks’ expected = 2024 commercial real-estate maturities rose 35% from previous estimates.&nb= sp;
So for now, despite a sharp slowd= own in new commercial mortgage deals being originated last year, longer-lin= gering loans and prior obligations to lend to projects as they move forward= are sustaining banks’ lending volumes.
“Existing commitments keep funding up, and maturing lo= ans have nowhere to go,” wrote Autonomous Research analysts in a rece= nt report. They estimated that about 40% of banks’ CRE loans maturing= this year are actually ones that were supposed to mature in 2023.
This is a good news-bad news situation.= On the one hand, loans aren’t being written off and losses crystalli= zed. But they also aren’t being paid off and resolved. The issue ling= ers and forces investors to keep making calls about whether the loans will = ultimately perform as banks are anticipating.
Large banks tracked by Autonomous have, at last report, set = aside loan-loss reserves for their office portfolios worth about 8% of thos= e loans. That is roughly five times the median overall allowance level acro= ss all loans.
How much cushion invest= ors demand will play a major role in whether bank stocks can keep pushing a= head after the KBW Nasdaq Bank Index’s 8% rally in March. Yet investo= rs don’t have much to go on. When it comes to commercial mortgages, t= rouble doesn’t necessarily manifest in the form of missed payments. M= any CRE loans are often structured with “balloon” payments, whe= re most of the principal is due at maturity.
In fact, the rate of delinquencies on banks’ CRE loans had ri= sen to just 1.2% as of the fourth quarter of 2023—still a fraction of= the 8%-plus rate touched in the aftermath of the 2008 financial crisis, ac= cording to Fed data.
<= span style=3D"font-family: Times New Roman, Times, serif;">Instead, a key w= ay that banks work through them is to refinance them with new loans when th= ey are due, or when property developers seek out permanent financing from a= nother lender, often a nonbank.
So, a= s unsatisfying as it may be, pushing out maturities can be the right answer= . For one, interest rates are set to fall, which may bring some relief for = landlords struggling to raise rents sufficiently to pay for mortgages at to= day’s high rates.
Plus, it appe= ars that discount-seeking buyers and lenders seeking to jump on opportuniti= es may soon be ready to step up. PGIM Real Estate in its report wrote that = there could be an “increasing role for alternative lenders.” Th= is would especially be the case if banks need to be more mindful of their c= apital and risk levels as new rules come into play.
The waiting game is no fun for inves= tors. But it might just be banks’ best move for now.
&nb= sp;

If you would like to unsubscribe, please click here

= Jeff Tabor Group=A0| 501 W. Broadway, Suite 800=A0| San Diego=A0| CA | 9210= 1

--709731c6a1a0bb34fa819ae27d14df18d1a4bb11d7fa69147ad8b1bc50ce--