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How banks may lose $430 billion more

November 25th, 2009, 6:00 pm · 16 Comments · posted by Jeff Collins

stanmullinmugOne in a series of commercial real estate forecasts …

Banks are projected to lose $430 billion on commercial real estate loans in the next two to three years, a Newport Beach receiver’s agent told the National Association of Realtors convention earlier this month.

This year’s commercial real estate defaults are projected to be 6.5% of outstanding loans, added Stan Mullin, an associate with California Real Estate Receiverships in Newport Beach. Mullin was one of the featured speakers at the NAR convention in San Diego. His message:

The impacts of the housing slump will pale in comparison to the potential impacts from the coming wave of commercial real estate defaults.

Highlight’s of Mullin’s talk:

  • $1.4 trillion in commercial loans are coming due in the next five years.
  • That’s equal to the same amount that came due in the last 15 years.
  • Lenders could take massive losses on their real estate portfolios from 2010-2013.

“If commercial is a nine-inning game, we’re in the first inning going into the second,” Mullin said. “We’ve got a long ways to go.”

A second speaker addressing commercial real estate woes, Robert Goldstein, president and CEO of Hospitality Consultants Inc. in Orlando, Fla., said there’s a “coming tsunami in defaults.”

Goldstein said that $260 billion to $300 billion in bank loans maturing in the next two years are not likely to qualify for refinancing because of falling property values.

Goldstein argued that the Obama Administration needs to take action to curb commercial default rates. Among the measures he proposed are providing incentives to lenders to refinance loans or encourage lenders to give owners more time to repay their loans.

More on the outlook for 2010 …

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 16 Comments

  • ocobserver says:
    November 25, 2009 at 6 pm

    $430 billion is softballing it.

    As the bottom falls out look for close to a $trillion$ in losses.

    And anybody who thinks we’ve hit bottom in residential property values must be playing in the sensimilla patch again.

    Folks, we’re in trouble. I mean big trouble. Hunker down. It’s going to get mighty ugly.

    • John L says:
      December 1, 2009 at 10 am

      This may be an opportunity for those sitting on some cash. However I would be “buyer be ware” because all of these people that have or are in the process of losing their homes have negatively impacted credit now. Those that have lost there jobs but are renting are in the same boat. With lending criteria more ridgid as opposed to the criteria that got us in this mess that means many fewer are going to qualify for RE loans if there are any out there. If the employment base in OC remains construction / RE driven we are out of luck. There are people I know that haven’t made a mortgage payment in over 18months and still haven’t recieved a “default” notice from the lender. That tells me we haven’t seen the worst of it yet.

  • Mike Strand says:
    November 25, 2009 at 6 pm

    I see this as opportunity!

  • Gunner says:
    November 25, 2009 at 8 pm

    Nahh, we are not in trouble. Obama has billions to throw around where ever is needed. This will be a bail-out, no doubt about it. Thankyou parents who are pooping out kids to pay all these bills in the future!

  • biffed on re says:
    November 25, 2009 at 11 pm

    bring em on-we’ve been waiting for them………..

  • Manassas VA Homes says:
    November 26, 2009 at 9 am

    The implosion in Dubai today alone is over 55 billion! How can we pretend that we are in recovery when this will make the sub-prime mess appear to be a picnic? Pretty scary when you think how dumb Americans have become.

  • olsrfbum says:
    November 26, 2009 at 9 am

    No worry, wall street will buy them back. (at a 60% discount)

  • Ezra says:
    November 26, 2009 at 10 am

    “Goldstein argued that the Obama Administration needs to take action to curb commercial default rates. ”

    no, you idiot, the govt needs to get out of the way and let the correction occur without further destroying the govt balance sheet.

    • Gunner says:
      November 26, 2009 at 11 am

      Gov’t balance sheet is disposable. We have future generations to clear it up. Right now we need to take care of ourselves while we have 20-50yrs of life left here on earth.

  • commmercial property says:
    November 26, 2009 at 10 am

    real estate professionals said that they expect the number of distressed properties coming onto the market to increase into the fourth quarter across 19 of the 25 countries surveyed.

  • Homes Alexandria VA says:
    November 26, 2009 at 3 pm

    It is hard to believe there is that much more money to lose!

  • bill says:
    November 27, 2009 at 5 am

    How fo you get the 430 billion number…give us details….

  • JK says:
    November 27, 2009 at 9 am

    The official term for Liar loans has now been changed to Pig loans. P.I.G.- Principal + Interest = Greed

  • Tex says:
    November 28, 2009 at 2 am

    Analysis: Dubai woes threaten U.S. property market
    The Dubai debt crisis could pull the floor out from an already fragile commercial real estate sector, illustrating the importance of one tiny country in an interconnected world.
    http://www.reuters.com/article/ousiv/idUSTRE5AQ4G620091127
    (excerpts):
    “Dubai may have to unload some very prestigious properties at distressed prices and this will drive the price of all commercial real estate lower,” wrote Richard Bove, a banking analyst at Rochdale Securities in Lutz, Florida.

    The main threat to U.S. commercial property from Dubai World woes may be “potential for contagion,” said Sam Chandan, chief economist at Real Estate Econometrics LLC in New York.

    The company is a partner with casino operator MGM Mirage (MGM.N) in the $8.5 billion CityCenter project, which would add 6,000 rooms to a Las Vegas Strip gambling corridor already saturated with unoccupied hotel rooms.

    In a November 23 report, Moody’s analyst Nick Levidy said prices could bottom at 45 percent to 55 percent below their peak, implying an additional 5 percent to 28 percent decline, but in a “stress case” could drop 65 percent from their peak.

  • Republicans are Traitors says:
    December 1, 2009 at 9 am

    Banks won’t lose anything.

    They’ll dump it on the government balance sheet with the approval of pigs like Timothy Giethner, Barney Frank, Ben Bernanke and John “Bailout” Campbell.