Posted on 06/09/2023 5:23:55 AM PDT by Kaiser8408a
Biden and The Fed are playing their own version of Johnny Horton’s “Sink The Bismarck!” This version is called “Sink The Economy!”
The commercial real estate space is experiencing stress following the recent turmoil in the regional bank sector, with the rapid rise in interest rates, tightening lending standards, and structural changes, such as sliding demand for office buildings.
Some structural factors, such as remote work and hybrid work, have doomed the office space segment. This has left empty office buildings scattered across major US cities as the number of landlords falling behind on repayments due to the difficulty of refinancing and high vacancies has hit a five-year high.
According to real estate data firm Trepp, more than 4% of office loans packed into commercial mortgage-backed securities were delinquent in the last 30 days as of May, the highest level since 2018.
Dan McNamara, the founder of Polpo Capital Management, told Bloomberg about impending CRE turmoil:
“This is just the tip of the iceberg for office delinquencies as $35 billion in CMBS office loans are scheduled to mature this year and the refinancing market is effectively shut to this asset class.”
The rise in delinquencies comes as security card swipe data from Kastle shows many workers have yet to return to their desks in major US cities, resulting in high office space vacancies nationwide.
After banking failures, we first warned premium subs about the “CRE Nuke Goes Off With Small Banks Accounting For 70% Of Commercial Real Estate Loans“ in mid-March.
As Goldman pointed out to clients days ago, one major issue is a steep maturity wall of floating and fixed-rate CMBS loans due this year and next. The inability to refinance in these challenging market conditions will likely unleash a tidal wave of defaults in the second half of this year.
Already, we have noted “CRE Giant Brookfield Defaults On $161 Million Debt For DC Office Buildings” and “San Fran’s CRE Apocalypse: The City’s Two Biggest Hotels Have Defaulted.” And also cited data from Moody’s Analytics that showed first-quarter CRE prices fell for the first time in over a decade.
Goldman Sachs chief credit strategist Lotfi Karoui told clients last month, “the most accurate portrayal of current market conditions” is data via the Green Street Commercial Property Price Index, which suggests trouble ahead.
Just how much danger? Karoui believes “Green Street indicates a 25% year-over-year drop in office property values and a 21% drop in apartment property values.”
So the combination of high vacancies, sliding prices, and tightening lending standards is a perfect storm that could ignite an eruption of delinquencies in office loans in the coming quarters.
And after the FBI confirmed that Joe and Hunter Biden received $5 million EACH in bribes by Burisma, the Ukrainian energy company, they call Joe Bidens “The Sleeze.”
Hey, maybe convert those empty towers into housing for illegal aliens and homeless? I’m sure there is a tax credit for that.
When is taking a 70 percent loss minimized to "experiencing stress?"
Experiencing a crash -- and much in Democrat-led inner cities because ....
Democrats.
Perhaps because remote working has shown so many of us that you don't have to live near $#*+hole big cities to earn a living? Or, if you know how to game the system, you don't even need to work at all?
Tax credit. 😂 Government will pay a premium to the owners for the use of those buildings to house wetback. There’s a catch. Those building owned by Chinese are first in line for the government handouts. I’m not joking. NYC is paying Chinese hotel owners to house wetbacks. Eff’n disgusting.
3 years ago a couple friends of mine and myself warned that this would be the biggest Land Grab in US History, things are shaping up to be just that. High Rise buildings are now 10 cents on the dollar and will soon be 3-4 cents on the dollar.
There are many downtowns in cities that remain vigorous.
Blue cities will struggle to recover for various reasons. Investors will have to re-purpose in those fecal zones.
Office buildings can be converted to residential towers.
In the 1960s, buildings in SoHo in New York City were converted from industrial space to then low-cost housing.
Midtown Manhattan is served by commuter rail lines that stretch over 80 miles outward.
Only Midtown office space readily allows people from all over Metro NYC to get together to work as a close team.
Some people have the self-discipline to work efficiently from home, but they are a minority.
Not likely. The plumbing retrofit alone is a technical nightmare and cost prohibitive. Better to raze and start anew.
“There are many downtowns in cities that remain vigorous.”
I was looking at Italian city centers on google Streetview a few months ago. They seem to be attractive places.
“The plumbing retrofit alone is a technical nightmare and cost prohibitive.”
I never encountered an office building that did not have restrooms on each floor.
Now if you want to put twenty housing units on a floor instead of one or two large luxury apartments, then expect nightmares.
“The plumbing retrofit alone is a technical nightmare and cost prohibitive.”
In mega-metros, luxury residential space can run $400 to $1000 per square foot.
Not to mention, how many were soured on the notion of downtown highrise living by the Covid lockdowns?
He needs a “sleaze” parody of “The Streak” song by Ray Stevens.
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