Moody's Investors Service reports that 65 percent of the U.S. commercial loans it rated in the April-through-June period of this year were interest-only for part or all of their terms, compared to only 7 percent of the overall market just two years earlier.
Such loans have been used in recent deals to snap up such diverse properties as the Two Rodeo shopping center in Beverly Hills and the General Motors building in Manhattan.
On the downside, as more commercial property loans are pooled and sold off as bonds to institutional investors and pension funds, these deals are creating significantly more risk for investors because the commercial mortgage-backed bonds could run into trouble in the face of higher interest rates, a drop in vacancies, or other market conditions.
