The percentage of commercial real estate loans paying off on their balloon date rebounded in August to 49.6%, up sharply from July's 12-month low of 26%, according to new data from Trepp LLC.
August's reading was the second highest this year, surpassed only by the 61.6% posted in February. Trepp says that the August total was also well above the 12-month average of 42.4%.
By loan count, as opposed to balance, 56.3% of loans paid off. On the same basis, the 12-month rolling average would be 53.3%.
‘In many ways, the improving payoff rate was to be expected,’ says Trepp. ‘For the first half of the year, a lot of the five-year loans originated in 2007 reached their balloon date, as the vast majority of these loans were made in the first six months of 2007. Most of these loans have had difficulty refinancing, which led to a huge dip in the percentage of loans paying off over the last few months.’
For the remainder of the year, Trepp forecasts loans reaching their maturity date should be more heavily skewed to earlier vintages. Loans from those periods were made with lower leverage and more reasonable valuations, which should result in better payoff numbers.