The Check is in the Mail

Derivative Logic closely tracks the best alternatives that property owners have as high interest rates persist in the market. The article provides a crisp summary of the size of the problem for commercial real estate over the next several years.

The Wall Street Journal article illuminates the challenges in the commercial real estate market due to a record amount of maturing loans. Over $2.2 trillion in debt is due by 2028, requiring refinancing at higher rates. This situation raises the risk of defaults as property values decline amidst higher vacancies and weakened cash flows. The article highlights the impact of this scenario on different sectors like office buildings, hotels, and apartments, and notes the potential broader implications for the financial system.

DL’s Take: March Rate Cut a Toss Up

The troubled commercial real estate market is bracing for a record amount of maturing loans, boosting the prospect of a surge in defaults as property owners are forced to refinance at higher rates.

In 2023, $541 billion in debt backed by office buildings, hotels, apartments and other types of commercial real estate came due, the highest amount ever for a single year, according to the data firm Trepp. Commercial-debt maturities are expected to continue rising, with more than $2.2 trillion coming due between now and the end of 2027, Trepp said.

Read more (subscription may be required): The Bill Is Coming Due on a Record Amount of Commercial Real Estate Debt – WSJ

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Interest Swaps or Rate Caps

Interest rates are in constant flux and having flexibility is critical to adapting and capitalizing on market changes. Whether you’re seeking to satisfy a mandatory hedging requirement from your lender, evaluating a refinancing opportunity or overseeing a portfolio of loans or bonds, every basis point has an economic impact, and we make sure your interests are protected.

To learn more about managing interest rate risk and what your best moves are please click here.

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Defeasance Services

A successful defeasance, by releasing you from your mortgage obligation, unlocks your ability to take advantage of historically low rates. Derivative is an experienced Defeasance Consultant. We make certain all the intricate legal and financial details are fully completed and done on time. We specialize in making your defeasance stress and worry free.

To learn more about what defeasance is click here.

Check out our defeasance cost calculator.

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