MIAMI—Distressed assets may be dwindling in the Southeast, but there are still deals to be done and there may be another wave just ahead. Indeed, much of the commercial real estate industry is bracing for the CBMS maturities coming due in 2015 through 2017. Nelwyn Inman, a shareholder at Baker Donelson in Chattanooga, isn't reassured by the decline in delinquencies in 2014 because she's also witnessing many challenged borrowers.

“We continue to see many borrowers who are faced with the inability to reposition aging assets in the face of growing demands of new and renewal tenants in multifamily, office and retail properties,” Inman says. “With maturity defaults increasing as we head into 2015, we expect this issue to hamper what might otherwise be simple transitions into replacement financing on older properties at a time when the demand for updated space crosses paths with competitive pricing pressures in most secondary and tertiary markets in the Southeast.”

Noteworthy is the fact that some distressed condo converters are still relying on CMBS loans to solve the problem. The asset Lantern 22 successfully completed a multi-year turnaround strategy on Lantern Square Apartments, a failed condo conversion project in Jacksonville, FL. Prudential Mortgage Capital Co. loaned Lantern $18.1 million in a CMBS transaction. Lantern 22, which is managed by Vivian Zumot Dimond on behalf of several private investors, initially acquired the property in 2006. Just before the economic crash, the owners converted the apartment complex into a condo and began trying to sell units.