In light of a weak economy and the pressure of loans coming due, hundreds of commercial properties in the metro Atlanta area―including some self-storage facilities―face potential foreclosure, according to an article in the Atlanta Journal Constitution. Many businesses have already given up the ghost, as evidenced by empty storefronts and buildings across the region.
Among the properties in danger is Extra Space Storage on Lower Roswell Road in Marietta, which faced possible foreclosure this month. The developer, Kennesaw, Ga.-based East Cobb Self Storage LLC, borrowed $6.1 million from Security Exchange Bank in Marietta to build the facility in 2007. Attorney Thomas E. Austin Jr., who is handling the case for the bank, said he has been handling rising numbers of commercial mortgage foreclosures in the last six months.
There is also concern that some of Georgia’s 300-plus banks might go under, as more than 30 have already failed in the last two years. Those failures were mostly because of losses on loans to residential subdivision developers, home builders and homeowners; now losses on commercial real estate loans could exacerbate the problem.
Strain on Georgia banks could prolong the drought of new loans to small businesses and other borrowers. In addition, rising commercial foreclosures could continue to depress rents and property values for shopping centers, offices and other properties.
After conducting a hearing on the issue in Atlanta, a congressional oversight panel said a wave of commercial real estate loan failures over the next few years could threaten America’s already weakened financial system, causing hundreds of small and mid-sized banks nationwide to become insolvent.
On approximately half of the nearly $1.4 trillion of commercial real estate loans coming due nationwide in the next five years, the borrowers owe more than the properties are worth. Georgia banks have more than $5 billion worth of unsteady construction and development loans and more than $6 billion in troubled home mortgages on the books, according to the AJC article.
Source: Atlanta Journal Constitution, Commercial loan losses a rising storm