Commercial Mortgage Lending

Commercial Mortgage Lending

Download PDF
Jun Chen William Pattison Reginald Ross
SEP 20, 2022

We recommend

Finding Opportunities in Real Estate

Spring 2022 Real Estate Outlook: Ukraine, Inflation, and Energy Prices

Explore Strategies

Real Estate

An examination of underwriting metrics and losses through 60 years of economic cycles

Executive Summary

  •  We compiled the longest-known dataset of commercial mortgage-loan performance, ranging from 1957-2020, with more granular performance information from 1974-2020.  
  • We used this history to re-examine findings from other commercial mortgage studies and confirmed that loans underwritten late in economic cycles carry more risk, but found the risk was mostly limited to higher-leverage loans. 
  • We also examined common underwriting metrics for their efficacy as measures of risk throughout economic cycles and found that the efficacy of debt-yield is increased when measured relative to capitalization rates.