I read this article from the Financial Times on commercial real estate over the weekend. It confirmed what I believe is happening with many maturing commercial real estate mortgages, lenders are just extending mortgages rather than reworking them. I think the scale of loan maturities, the likely inability of borrowers to obtain new financing, and the unwillingness for banks and CMBS servicers to realize losses play into the "extend and pretend" mentality. This quote did not surprise me but is still eye-catching:
It's sobering to think that half of the $1.4 trillion in commercial real estate loans due before 2014 are underwater. Reworking debt - not extending it - will be the overriding theme driving commercial real estate for the next three to four years. Lenders are going to have to start getting proactive on their loan portfolios, and stop waiting until borrowers default to begin discussions.