An Increasing Risk of Commercial Mortgage

What I more frequently saw in US and Europe is an increasing rate of delinquency of commercial mortgage. Originally, the problem started with a sub-prime loan, but now the issue has been surely widespread into the commercial mortgage side. Here in Tokyo, this bad problem has been already outstanding. Because of a credit crunch, everybody can hardly borrow the money from lenders; that's why he or she cannot but office properties at a discount, even though the decent deal comes into the market.

I certainly understand that banks are not ready to make a new loan to the deal. This is partly because their risk capital can be hardly allocated to non-recourse loan due to a decline in their held Japanese stocks and increasing non-performing loans. And this is partly because they are busy with their maintenance towards outstanding loans, including a huge volume of refinancing deals, where a majority of loans are underwater.

The stock prices have been globally on the rise in March and they showed us the best monthly return; however, the real estate sector have been lagging substantially behind. What we will see in 2009 includes a loan restructuring, foreclosure and administration etc. A wave of negative events will come to the commercial real estate market later this year.