IRS Creates New Tax Rule in Effort to Aid Commercial Real Estate Industry
In response to financial woes plaguing the commercial real estate sector, the Internal Revenue Service (IRS) has issued a new rule that is designed to aid owners and developers of commercial real estate in the US. The change will help help commercial borrows obtain loan extensions more easily and allow for greater flexibility in the reworking of mortgages.
The is aimed at loans secured by office parks, shopping malls and other types of commercial properties that have been sold to investors after being securitized. Many commercial property owners face difficulty in negotiating for refinancing or extensions on these loans, especially those with loans coming due within a year or longer. Since these property owners were struck hard by a combined hit from rapidly deflating property values and tighter lending practices they would face further trouble by having to wait out the negotiation period for extending or reworking commercial mortgages, often a lengthy process.
According to Deutsche Bank, by the end of 2012 nearly $153 billion in securitized commercial real estate loans will be coming due and nearly $100 billion worth of those loans will have significant trouble getting refinanced. The bleak outlook finds many borrowers unwilling to invest in property upkeep or renovations because they are not confident they will be able to hold ownership of the property once their loan comes due.
The new rule is designed to ease loan servicers burden so that they can more readily negotiate on loans modifications made after the beginning of 2008.
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