Posted on 07/21/2023 11:31:07 AM PDT by Kaiser8408a
No, this isn’t a John Kerry/Greta Thunberg hysterical warning about climate change. But a storm created by 1) Biden/Congress spending splurge and 2) excessive monetary stimulypto by The Federal (Feral) Reserve. Now that The Fed is withdrawing the excess stimulus, we are seeing a world of pain for commercial real estate. A financial climate change!
Days after Barry Sternlicht’s Starwood Capital Group defaulted on a $212.4 million mortgage backed by an Atlanta office tower, Bloomberg released an eye-opening interview with the billionaire investor about mounting distress in US commercial real estate.
“We’re in a Category 5 hurricane,” Sternlicht said in an interview on June 28 taped for a July 25 release in an upcoming episode of Bloomberg Wealth with David Rubenstein.
Sternlicht warned, “It’s sort of a blackout hovering over the entire industry until we get some relief or some understanding of what the Fed’s going to do over the longer term.”
He explained the CRE downturn was sparked by the Federal Reserve’s sixteen months of aggressive interest rate hikes to tame inflation — and unlike past downturns — not due to reckless speculation.
In early March, during the regional bank meltdown, we penned a note that accurately pointed out stress would materialize in the CRE space, mainly in offices and malls. The note was titled Why Small Banks Are In Big Trouble: As Hedge Funds Pile Into The New “Big Short,” The Next’ Credit Event’ Emerges. And since, we have penned countless CRE notes (some of which are here & here & here) about the unfolding crisis.
Tighter credit conditions following the regional bank crisis in March have made refinancing existing buildings exceptionally hard for landlords and come as vacancies rise.
(Excerpt) Read more at confoundedinterest.net ...
I’ve been saying this for months, but my timing is obviously crap.
The market can remain irrational longer than you can remain solvent.
Deliberately done.
Can we call it a recession yet?
Watch as Fannie Mae, Ginnie Mac and all the Gov’t lenders whose debt is short term and off the books are forced to refinance at rates double the rates that they loaned it out in 30 year fixed rate mortgages.
bttt
The businesses had to institute work from home policies.
Once the all clear was sounded on one wanted to return to workplaces located in large cities where parking & commute were expensive. In addition the lull, in activity in the cities allowed the homeless to move in and take over, making the navigation to & from the parling spot to building became less than enviable tasks to navigate. So much nicer to roll out of bed walk into another room, and go to work.
Perhaps DJT will snap them up cheap & turn them into residential buildings.
The 2008 financial collapse was just the warm up to the main event
Kaiser8408a :" Biden, Congress and The Fed.
Terrorists of the middle class."
"No, this isn’t a John Kerry/Greta Thunberg hysterical warning about climate change.
But a storm created by 1) Biden/Congress spending splurge and 2) excessive monetary stimulypto by The Federal (Feral) Reserve.
Now that The Fed is withdrawing the excess stimulus, we are seeing a world of pain for commercial real estate.
A financial climate change!"
"Days after Barry Sternlicht’s Starwood Capital Group defaulted on a $212.4 million mortgage backed by an Atlanta office tower, Bloomberg released an eye-opening interview
with the billionaire investor about mounting distress in US commercial real estate."
"“We’re in a Category 5 hurricane,” Sternlicht said in an interview on June 28 taped for a July 25 release in an upcoming episode of Bloomberg Wealth with David Rubenstein."
"Sternlicht warned, “It’s sort of a blackout hovering over the entire industry until we get some relief
or some understanding of what the Fed’s going to do over the longer term.”
(My Opinion) : The fall out from the Biden economic policies have affected commercial office space ,
and as well, the commercial and retail stores that depend on traffic of the workers downtown in office spaces.
When you add inflation into the mix, workers are no long happy or willing to endure hours in traffic just to earn an income or living wage.
There is much discontent among workers forced to attend office duty for a wage that doesn't indicate that employers appreciate the additional expenses that workers have to endure.
This discontent is reflected in commercial office space and retail stores, and thus commercial real estate investors are unable to meet their mortgage obligations.
Could this chaotic economic situation be anymore severe than the financial housing crisis of 2008 and 2009 ?
Many people in the know are saying that there is a delayed exhaustion of funds by investors due to inflation and the covid crisis.
Consider in the vicinity of your residence, how many store fronts are now vacant, or shopping malls that have papered over display windows ?
Expect it to get worse now that interest rates have climbed up from "free money" into commercial real estate strangulation.
Build Back Better has now become Build Back Bankruptcies !
Consider this a "situational awareness" warning ...
I predicted this in March 2020 when office buildings were evacuated for remote working.
My small town has over 10 million square feet of empty space. A friend worked at a company that occupied 6 of 8 floors of one building. Now they have 1 and 1/2.
.
Thanks for the ping!
Ah April 2021, a great time for me. Bought new home and funded with a 30 fixed 2.875 mortgage. Don’t think I will see those rates again/ Better they thyr loaned me the money about 385,000 to a 76 year old guy. Stupid people!
The author fails to mention that many refuse to return to the city because the cities are filled with dangerous Democrat street thugs. I’m sure I’m not the only one who has “gone Galt”. In today’s socialist world, where politicians talk of forcing home owners to house illegal aliens, real estate ownership anywhere (commercial or residential) can rationally be viewed as a liability.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.