Colliers Quick Hits | July 7, 2022
Rising interest rates could pinch some office property owners with CMBS loans, stressing debt service coverage ratios (DSCR) as borrowers look to refinance their debt. An analysis by Trepp suggests that 6.1% of office loans maturing in the next 36 months could face a DSCR below 1.0 at a 6.5% coupon rate (interest-only loan). Borrowers with loan extensions are likely to take them because of steeper loan costs in today’s higher-interest-rate environment. Once those loans truly come due, they could be attractive investments for those bringing equity to a recapitalization or lenders providing bridge or mezzanine debt.
Narrowing this focus to the next 18 months (office loans with a maturity date through 2023), in the Atlanta, Boston, Chicago, Dallas, Los Angeles, New York, San Francisco, Seattle, and Washington, D.C., metro areas, $33.2 billion is coming due. Atlanta and Seattle have the smallest overall maturity exposure at $405 million and $513 million, respectively. On the other end is New York (mostly in Manhattan), with $15.6 billion in loan maturities, nearly half of the nine-market total. From 2017–19, Manhattan averaged $16.1 billion in annual office sales volume.