Office and Retail Refinancing

By: Rob Seidenwurm

Much of the rebuttal of why the CMBS wall of maturities will be less of a problem is that there is plenty of capital available in the markets for refinancing.  Forgetting about whether this is true or not, let’s take a moment to consider what a rational, responsible loan underwriter should look at when approving a refinance.

For the most part, CMBS loans have 10-year terms, so the underwriter needs to look into their crystal ball and try to envision the value of the property in 10 years to ensure they will be paid off.

Virtually everyone I have asked the question “Will retail and office markets be healthier, less healthy, or about the same 10 years from now?” have answered “less healthy.”  When you are asking yourself this question, ask yourself “Do you think a higher or lower percentage of retail business will be done in brick and mortar businesses 10 years from now?” and “As a percentage, will more or less people do business out of a formal office?”

For these reasons, refinancing a CMBS loan on an office or retail may be tricky!