24 May 2024

Losses Pile Up in Top-Rated Bonds Backed by Commercial Real Estate Debt...Loan defaults could reach Great Depression-era levels if rates stay high

For the first time since the financial crisis, investors in top-rated bonds backed by commercial real estate debt are getting hit with losses.

Industry analysts warn of more pain to come in safest CMBS




A National Bureau of Economic Research paper warned commercial real estate loan defaults could reach Great Depression-era levels if rates stay high.

14,652 views Jan 1, 2024 #yahoofinance #youtube #realestate



USC Finance Professor Erica Jiang discussed the risks on Yahoo Finance Live.
  • Jiang noted falling property cash flows, declining values, and refinancing challenges raising distress, especially for offices, multifamily, and hotels.
  • She says "rising interest rates make it very difficult" to refinance, causing rollover issues.
With 15% of commercial loans already underwater presently, Jiang notes default outlooks now "don't look very good."
  • She highlighted offices as particularly exposed, with 45% of office loans underwater, meaning the property value is below the loan amount.
  • This makes refinancing unlikely as it "has high default risks."
Orange County Register
19 hours ago
Even AAA-rating can't save investors from commercial real estate losses – Orange County Register




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