2012 marks the year when many, many commercial real estate loans, written at the craziest height of the market, are coming due or need adjustment. Although there has long been talk that such an event would cause huge disruptions in the market, the economy seems to have improved enough to allay those fears somewhat. However, there are definitely loans out there that should never have been written.
Today's New York Times cites one such loan, that made wild assumptions about the increases in NYC rents, the ability of an owner to do condo conversions, and the lack of any increases in operating costs. Viewed through the lens of the past five years, all that comes to mind is "What were you thinking?". But isn't that always the way the cycles go? It does often seem that the life cycle of a banker is just slightly shorter than an economic cycle, so that we are always repeating the same mistakes.
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