Large Bank Supervision Forum eBook

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The 3-headed dragon: falling revenue, higher expenses, and rising rates . . .

1. In many office markets, increasing vacancy rates are prompting remaining tenants to renegotiate their leases, driving down NOI and the resultant Collateral Value 2. Rising expenses, such as casualty insurance and taxes, are driving down NOI and the resultant Collateral Value 3. Rising interest rates correlate to higher Cap Rates, driving down Collateral Value

REMEMBER: Many stressed CRE loans coming due were underwritten at low rates. Regardless of the collateral value challenges, refinancing the loan at today’s rates could very likely result in higher loan servicing and lower DSCRs

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Each Commercial Real Estate Subsector Has Different Risk Profiles . . .

Source: Athene Holding Ltd Investor Presentation

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