High-profile properties have encountered problems. Kettering Tower, the city’s tallest office building was foreclosed on and eventually placed into receivership, while the owners of the 32-34 N. Main St. office building that once housed Key Bank’s Dayton headquarters have decided to close all but the ground floor of that building for financial reasons.
In October, Elizabeth Place, a former hospital that has been turned into office and medical spaces, went into Chapter 11 bankruptcy so its owners could negotiate more favorable terms with their lenders.
Nationally, Congressional examiners also see trouble looming in the commercial real estate sector.
In a Feb. 10 report, the panel overseeing the Troubled Asset Relief Program said $1.4 trillion in commercial real estate loans will reach the end of their terms between 2010 and 2014. The largest losses in the commercial real estate sector are expected to happen next year and beyond, with banks losing as much as $300 billion.
“A significant wave of commercial mortgage defaults would trigger economic damage that could touch the lives of nearly every American,” the report states. “Empty office complexes, hotels and retail stores could lead directly to lost jobs.”
Banking-industry trade groups such as the Ohio Bankers League have criticized the report, calling it misleading and questioning its calls for additional “stress” testing of community banks.
Mike Van Buskirk, the league’s president, said banks need to be realistic when weighing whether to work out new terms with their commercial borrowers. But banks also have an incentive to work out new terms with their commercial borrowers, especially during a depressed real estate market, he said.
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