Just How Big is the Wall of Maturities?

According to Newmark, there is now a $2 trillion maturity wall of CRE loans facing banks over the next three years. A dizzying sum.

“Banks will be under pressure,” CEO Barry Gosin told the Financial Times. As the FT noted, the brokerage handled $50 billion of loan sales for the Federal Deposit Insurance Corporation after Signature Bank failed and the FDIC closed it down.

Yes, banks will be under pressure as they have been. But the statement raises a question. When the size of the oncoming wall — or wave or lava flow, or whatever to call the coming flood — is mentioned, is anyone really sure of the size/?

CRED iQ’s database at middle of December 2023 showed “approximately $210 billion in commercial mortgages that are scheduled to mature in 2024, with an additional $111 billion of CRE debt maturing in 2025. In total, CRED iQ has aggregated and organized a total of $320 billion of commercial mortgages slated to mature within the next 24 months.”

In February 2024, the Mortgage Bankers Association said that 20% of commercial and multifamily mortgage balances were to mature this year. “Twenty percent ($929 billion) of the $4.7 trillion of outstanding commercial mortgages held by lenders and investors will mature in 2024, a 28 percent increase from the $729 billion that matured in 2023, according to the Mortgage Bankers Association’s 2023 Commercial Real Estate Survey of Loan Maturity Volumes,” they wrote

Even discussions can be misleading. Take the Financial Times article. The headline is, “Banks face $2tn of maturing US property debt over next 3 years.” The immediate question becomes how much of banks’ portfolios are coming due/? But to get there, it’s critical to see what the total holdings are.

According to the Federal Reserve’s “Assets and Liabilities of Commercial Banks in the United States,” also known as H.8, the total of commercial real estate loans, including multifamily, held by banks was $2,985.5 billion during the week of March 20, 2024. Given the timelines of loans, most frequently five-year cycles, a 20% turnover annually is a realistic estimate. But a $2 trillion count would be two-thirds of all bank loans, which doesn’t seem plausible.

GlobeSt.com contacted Newmark for some clarity. The firm responded with information from David Bitner, Newmark’s executive managing director and global head of research. Here are his points:

• “The $2T figure should indeed refer to ALL CRE loans (including 5+ unit multifamily).”
• “Bank maturities are the largest share of near-term maturities, which is a large part of why we focus on them.”
• “Debt fund and CMBS/CRE CLO debt is also front-loaded.”
• “Data comes from Mortgage Bankers Association latest Loan Maturities report (released in mid-February).”

So, the pool of loans is much larger than those held only by banks. Even with the “extend and pretend” treatment lenders seeking to keep losses off their balance sheets, eventually reality sets in. In one sense, it won’t matter who holds the loans. As accounting standards eventually force lenders to write off clear losses, the result would be a large exercise in mark-to-market, lowering the value of many if not all CRE loans.

That would hurt the total asset values of many banks, which is the condition that led to the closures of Silicon Valley Bank, First Republic Bank, and Signature Bank last year. As Gosin told the FT, such a result would force some banks “to liquidate their loans or find other ways to reduce their weight in real estate,” whether by finding ways to increase capital, offload the risk, or further reduce the amount of CRE lending they do.