Cheap Oil Is Squeezing Property Owners in Energy Hubs

[Purveyor]

by Sarah Mulholland
12:01 AM EDT
April 7, 2015

More than $1 trillion in U.S. real estate debt from the last decade’s property boom is starting to come due as oil prices stagnate, squeezing property owners in cities and towns centered around the energy business.

The 50 percent plunge in crude values since June is already dragging down property prices in Texas, according to Green Street Advisors LLC. Real estate investors are adjusting their underwriting across the state as they gird for contraction at energy companies, demanding higher yields on their investments, the property-research firm said.

“It is going to be harder and more costly for borrowers in energy hubs to refinance loans in today’s environment, versus when oil was $100 a barrel,” Andy McCulloch, an analyst at Newport Beach, California-based Green Street, said in an e-mail. “Just how much harder or costly will depend.”

Even as U.S. commercial real estate values surge past records set in 2007, with cash from around the globe pouring into the best buildings in the biggest cities, lenders are becoming more cautious in regions that rely heavily on the oil industry for growth. That could create higher hurdles for borrowers that need to refinance mortgages in places such as Texas and North Dakota, according to Andrea Bryan, a managing director at New York-based financial-services consulting firm NewOak Capital LLC.

Lenders are reassessing risks in energy towns as roughly $1.1 trillion of property loans come due across the U.S. over the next three years, according to Richard Hill, a real estate debt analyst at Morgan Stanley. About $345 billion is left over from a lending binge on Wall Street that culminated in 2007 with a record $232 billion in sales of securities linked to properties including skyscrapers, shopping malls, hotels and apartment buildings.

more...

http://www.bloomberg.com/news/articles/2015-04-07/oil-rout-squeezes-property-owners-from-houston-to-north-dakota

[Romeo.lima333]

1. they were artificially inflated now they defate back to reality

[AuntPatsy]

2. the cut throat attitude from even simple land owners as well as big business proved once again

Inflation though came mostly from many egos that have since taken the hits such behavior deserved, too bad those on the top of the rung have felt no serious need to feel any repercussions personally...