Posted March 21st 2012
Real estate debt continues to weigh on the financial sector with commercial real estate loans accounting for approximately $784 billion of assets at the top 100 U.S. banks as of 3Q11, according to an Ernst & Young 2012 distressed real estate investing report. Commercial real estate loans held by the remaining U.S. banks totaled $750 billion. Smaller banks appear to be bearing the burden: Commercial real estate loans constituted only 7 percent of the total assets of the top 100 banks compared with 26 percent of total assets of the remaining banks.
With an abundance of commercial mortgage loans coming due, commercial real estate will continue to impact the balance sheets of financial institutions for the foreseeable future: An estimated $800 billion to $1.2 trillion in U.S. commercial real estate loans are scheduled to reach maturity over the next five years.
The loans may present significant investment opportunities, according to the report. With an estimated one-third of borrowers unable to refinance due to property values hovering at or below loan amounts, financial institutions will be left with the limited choices of foreclosing on the assets, restructuring the debt, or selling the loans.
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