Commerical real estate debt clouds future
The News and Observer reports: Wakefield Commons looks like almost any other shopping center in this growing region. People who live and work nearby --the ones who rely on the center for groceries, a quick bite or sometimes a movie --hustle in and out, around the clock.
Few, if any, shops are empty, a rarity in these penny-pinching times, which is part of the reason competing landlords are keeping an eye on the 160,000-square foot center in North Raleigh.
The other part: Its owner, half a world away, is trying to escape a rolling boulder of debt in an era of constrained lending.
Centro Properties Group of Melbourne, Australia, needs to pay down at least $2.6 billion in debts maturing by the end of 2011. And if credit doesn't start flowing soon, the balance could be a burden not to just Centro, but to competing landlords.
Lenders, who have tightened up in the past year and a half as the economy soured, have made it harder for many landlords to refinance debt. The lack of debt financing is also sidelining many buyers.
So Centro, to pay back its lenders on time, has been forced to unload some of the 650 properties it owns around the country at bargain prices. And if Wakefield were to be sold under pressure, it could weigh on the values of other nearby retail properties.
This financial fix --healthy property, ailing owner --illustrates how the global credit crisis is turning landlords into casualties even in some of the country's fastest-growing regions. And Centro is just one landlord.
In the middle of this decade, rapids of easy money flowed through commercial real estate, forcing up property values, rents and expectations for more of the same. Now landlords, already facing softening values, are bracing for a severe correction as the debts that fueled the boom come due.
Nationally, the value of distressed commercial properties has at least doubled to $49.2 billion since the end of last year, according to Real Capital Analytics of New York, which defines a distressed asset as a property with a reported default, foreclosure, bankruptcy filing or lien.
The Triangle represents a mere fraction, accounting for the second-fewest troubled assets, next to the Washington, D.C., metropolitan area. Real Capital lists only a few distressed commercial properties in this area, including Wakefield Commons and several other Centro properties.
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Posted by: Nina Turner