Many commercial real estate developers own strip malls or multi-family properties in Maryland that are secured by loans. As a large number of these types of loans are scheduled to mature in 2017, some borrowers will be left scrambling for refinancing.
According to Morgan Stanley, people holding these types of loans may find it difficult to secure financing in order to refinance them when they mature. The problem is that these types of property are ineligible for government-sponsored enterprise financing. This has left many investors to depend on smaller banks in order to secure the funding they need.
Small banks have filled the gap in funding, but they now have a record amount of exposure to these loans, which are considered to carry a significant degree of risk. Morgan Stanley warns that regulators are likely to look at banks that have a significant amount of exposure to these loans with more scrutiny, resulting in the banks being less willing to approve loans for owners who need refinancing.
Commercial real estate developers who have commercial real estate loans that are scheduled to mature next year might want to start identifying funding sources now. A real estate law attorney may be able to provide some assistance in this regard. Experienced legal counsel may be aware of alternative financing sources that other clients have used. One such alternative is crowdfunding. When the Securities and Exchange Commission loosened its restrictions on the types of investors who can participate in non-registered transactions, it opened up the door to a new source of funding for developers who had been unable to reach this demographic in the past.