NEW YORK--(EON: Enhanced Online News)--Kroll Bond Rating Agency (KBRA) released a report on October 18, 2013 regarding how cap rates and interest rates are impacting CMBS. As the Washington maelstrom swirls, with attention alternating between the budget battle, a new Federal Reserve Chairman, and the tapering of QE, commercial real estate (CRE) investors are bracing for the impact these events will have on liquidity, capitalization (cap) rates and interest rates. With the bulk of legacy CRE loans approaching their maturity dates, these dynamics will become increasingly important. The paper examines the impact that increasing cap rates may have on the ability to refinance performing fixed-rate CMBS loans over the next five years, by assuming current cap rates will rise by 75 bps and 150 bps. Not surprisingly, the number of borrowers that would be able to successfully find new financing will be under significant pressure in these scenarios, particularly in 2016 and 2017, when many full term interest only (IO) loans will reach maturity.
About Kroll Bond Rating Agency
KBRA was established in 2010 by Jules Kroll to restore trust in credit ratings by creating new standards for assessing risk and by offering accurate, clear and transparent ratings. KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).