Publications

- April 1, 2010: Vol. 2, Number 4

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CRE Loans and CMBS: Asia Pacific Investors Will Find Challenges and Opportunities in the U.S. Real Estate Market

by Aashish Kalra and Lee Lambert

Commercial real estate in the United States is entering an extended period of unprecedented restructuring and repositioning. The next five years offer huge opportunities to Asia Pacific investors who have the skills to acquire and operate U.S. assets through a challenging environment.

THE STORM IS HERE

Between 2010 and 2014, approximately US$1.4 trillion of commercial real estate loans will reach the end of their terms. A substantial portion of these loans were originated at or near the peak of the market, and the value of the underlying collateral has diminished markedly. The Moody’s/REAL Commercial Property Index, which tracks U.S. commercial property values through repeat sales, dropped from a peak of 191.87 on 31 October 2007 to 109.10 on 30 November 2009 — a decrease of more than 43 percent. At current valuations, nearly half of the financed commercial assets are “underwater” and worth less than the outstanding debt,

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