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RCA: Trillions in Assets on the Hook

NEW YORK CITY-Real Capital Analytics says the equity in $1.3 trillion of properties is 'at great risk if not already wiped out.'

By Paul Bubny | Updated on July 29, 2009

NEW YORK CITY-More than $2 trillion in major commercial properties, traded during the peak of the current cycle, are at risk, says Real Capital Analytics in a report issued Wednesday. “Significant refinancing hurdles” and a rising threat of default are cited in the report, prepared by Robert M. White Jr., RCA’s founder and president.

The RCA report notes that $2.2 trillion of properties acquired or refinanced between 2004 and 2008 have lost value since the transaction. “Many of these properties, typically leveraged 70% to 80%, would face [problems] even if prices held firm,” White writes. “Few lenders now are willing to advance more than 50% to 60% of value.”

He adds that the equity in $1.3 trillion of properties is “at great risk if not already wiped out,” because properties acquired or refinanced in 2006 through 2008 have already seen price declines of 25% or more. Prices for office, industrial, retail and apartment properties nationally have dropped 34.8% from the October 2007 peak, as measured by the latest Moody’s/Real Estate Analytics Commercial Property Price Index, which is derived from RCA data.

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