Loan-Extension Picture Could Be a Lot Worse

In the first decline since July in the delinquency rate among U.S. commercial real estate loan collateralized debt obligations, that rate fell from 3.13 percent in October to 2.80 percent in November, according to the latest information from Fitch Ratings.Fitch currently rates 35 CREL CDOs comprising about 1,100 loans and 370 rated securities/assets with a balance of $23.8 billion. “The continued lack of available capital is driving maturity defaults of CRE loans,” Fitch senior director Karen Trebach said in a prepared statement. “However, asset managers are continuing to extend many of these loans, with the extension of two large performing matured balloon loans leading to the net decline” in this month’s CREL delinquency index (DI). The index includes loans that are 60 days or longer delinquent, matured balloon loans, and the current month’s repurchased assets. Nearly 48 percent of the loans in the CREL DI are collateralized by multi-family properties. As the economy worsens, Fitch said it anticipates a rise in delinquencies, with the highest risk estimated to be among loans backed by hotel and retail properties, which make up more than 25 percent of the total universe of loans in Fitch-rated CREL CDOs. Asset managers reported 45 new loan extensions this past month compared to 35 in October, according to Fitch. Due to the short-term nature of the loans in CREL pools, Fitch said it anticipates an average of 40 extensions per month to be exercised going forward, or 3.5 percent by number of loans in the CREL CDO universe. In a close-up to complement that high-altitude view of the loan-extension picture, Cedar Shopping Centers Inc., of Port Washington, N.Y., announced yesterday that it had extended its $300 million (expandable to $400 million) secured revolving credit facility through January 2010. The facility is through a nine-bank syndicate led by Bank of America; the remaining availability under the facility is about $42 million. “With this agreement, Cedar will have no debt obligations maturing until 2010,” company CFO Larry Kreider said in a prepared statement. “We also anticipate arranging a further extension beyond 2010, or a new three-year facility for our stabilized properties, to complement our $228 million development financing facilities which were put in place in June and September of this year.” Cedar currently owns and operates about 12.1 million square feet of gross leasable area at 121 shopping center properties, of which about 75 percent are anchored by supermarkets and drug stores with average remaining lease terms of about 11 years. It also owns a substantial pipeline of development properties, as well as about 406 acres in primarily unimproved development parcels.