St. Louis commercial properties in, near foreclosure total $726 million
St. Louis Business Journal reports: Distressed or troubled commercial properties in the St. Louis metro area are on their way to reaching the $1 billion mark, with $726 million in commercial properties currently foreclosed on or at risk for foreclosure.
Industry research firm Real Capital Analytics (RCA) identified 45 local apartment, hotel, office or retail properties that are in financial trouble or at risk for foreclosure in a study that tracks properties nationwide.
The bulk of the properties — with a value of $499.7 million — are considered “potentially troubled.” These 29 properties have an owner in financial distress that could lead to foreclosure or a bank taking back ownership of the property.
A more severe category is labeled “troubled,” which represents a property in bankruptcy or default. There are 12 troubled commercial properties in the St. Louis area with a value of $118.4 million. RCA’s data shows there are four local commercial properties in the most severe level of distress — “lender foreclosed” properties — totaling $108.4 million. New York-based RCA tracks individual properties with a value in excess of $2.5 million.
“RCA has tracked an increasing amount of distressed properties in recent months,” Managing Director Dan Fasulo said. “With almost $5 billion worth of foreclosures (nationwide) in January, this will be the first month where foreclosures outpaced actual commercial property sales.”
Just under $90 billion worth of property nationwide that is on RCA’s watch list has the potential to move into the distressed category in upcoming months, Fasulo said. Nearly two dozen metropolitan areas in the United States each have a total of $1 billion or more in financially troubled properties. Fasulo said RCA does not have historical data because commercial foreclosures even a year ago were rare.
“Owners are having to recapitalize or walk — lose their assets,” said Tripp Hardin, senior vice president of investment properties at CB Richard Ellis. Hardin projects more Class B and Class C office and industrial buildings will be available this year as their owners default or simply walk away from properties because of the debt load.
A driving force behind commercial foreclosures locally and nationally is the inability of property owners to refinance their properties due to tightening in the credit markets. Commercial mortgage-backed securities, or CMBS, are repackaged loans on hotel, retail, office and industrial properties. According to Standard & Poor’s, between $15 billion and $20 billion in CMBS loans are expected to mature nationwide in 2009 and could hit $35 billion next year.
“What we’re going to see are better-quality properties being foreclosed upon due to lenders being a lot more conservative with refinancing when a loan matures,” said Paul Hilton, senior vice president and principal with Colliers Turley Martin Tucker. “We’ll likely see properties that don’t have anything fundamentally wrong with them, but they were over-leveraged.”
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Posted by: Matt Stone