Japan Has Biggest Property Loan Defaults in April, Moody’s Says
Defaults on debt backed by Japanese office buildings, shopping centers and warehouses rose to a record in April due to a single loan of more than 100 billion yen ($1.24 billion), according to Moody’s Investors Service.
Bad loans rated by Moody’s last month rose to 147 billion yen from 26.9 billion yen a year earlier, said Koji Kumamaru, managing director, and Takahiro Okubo, a senior analyst, at Moody’s in Tokyo. The monthly default balance was the biggest since the rating company started assessing commercial mortgage backed securities in 1999, they said.
Prices for Tokyo office buildings have fallen as much as 50 percent from their 2007 peak, according to an estimate by CB Richard Ellis Group Inc.’s Japan unit. The March 11 earthquake, Japan’s strongest, may delay a recovery in the nation’s real estate investments by six months, according to Kumamaru.
“The risks are more imminent for investors after the earthquake because of uncertainties,” he said in an interview.
Japan is one of four countries that have the largest gap between capital available and debt of commercial properties that needs to be repaid, reflecting rising loan outstanding, according a report by DTZ Holdings Plc. The other three nations are the U.K., Spain and Ireland.
Total outstanding loans rated by Moody’s rose by a quarter to 568 billion yen in April from March, the rating agency’s data showed. The increase was the biggest in five months.
Loans of more than 10 billion yen have a more difficult time in getting refinanced because they tap a smaller pool of buyers and lenders, Moody’s said in a report today.
The default rate by balance for commercial loans in Japan was 31.8 percent as of March 31 from 31.5 percent as of Dec. 31, Fitch Ratings Japan Ltd. said in a separate report on May 9.
To contact the reporters on this story: Kathleen Chu in Tokyo at Kchu2@bloomberg.net
To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net
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