Commercial real estate refinancing affordable once again

Monday, February 21, 2011

“A lot of businesses were also taking advantage of those high property values to refinance their loan and take some cash out to generate working capital,” said Herb Tousley, director of the Shenehon Center for Real Estate at the University of St. Thomas Opus College of Business.

Those loans typically were written to amortize over 20 years, but they came with five-year balloon payment provisions, which means many of them need to be refinanced within the next two years.

Conventional bank lenders won’t be able to write many of those new loans, though. Many properties lost between 20 and 40 percent of their assessed value after the commercial real estate bubble started to deflate in 2008, Tousley said, pushing values down to a level at or below the principle remaining on their mortgage.

That means owners need to come up with more cash to refinance their mortgage, and few small businesses are carrying a surplus of cash right now.

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Originally published: 02/21/2011, Finance and Commerce