US - Commercial Real Estate & Reits

[winston]

The Biggest Farce in the History of Retail

By Porter Stansberry

A recent Wall Street Journal article warned about the big problems developing in commercial real estate, especially for shopping centers.

Overall, the default rate on commercial real estate loans that have been packaged into securities (about $400 billion of debt) has now breached the critical 5% threshold. The default rate on these securities is 5.6%. That means, going forward, it's going to be a lot harder for commercial real estate firms to move risky mortgages off their books.

Research firm Morningstar now predicts that 40% of commercial-mortgage-backed securities loans maturing next year won't be paid off.

If that's anywhere close to accurate, the entire market for commercial real estate lending will be virtually shut down, making it almost impossible to "roll" even relatively safe mortgages forward. This is a huge risk to real estate companies.

And there's more bad news...

Under the Dodd-Frank regulatory overhaul, a series of new rules will go into effect on Christmas Eve. These new rules require issuers of commercial mortgage-backed securities to retain 5% of the securities they package and sell.

That means these firms' balance sheets will take on even more stress, as they won't be able to sell all of their loans. Tad Philipp, director of commercial real estate research at ratings agency Moody's, told the Wall Street Journal: "You couldn't have planned worse timing."

Let me tell you the best part about this bad news. Most of the commercial real estate loans that are going bad are loans that were made in 2006 and 2007 and then packaged into securities.

Source: Daily Crux

[winston]

A Third Of All U.S. Shopping Malls Are Projected To Close As ‘Space Available’ Signs Go Up All Over America

By Michael Snyder

Source: Economic Collapse Blog

http://theeconomiccollapseblog.com/arch ... er-america

[winston]

“2017 Will Be A Tipping Point” – Why Some Think This Is The Next “Big Short”

By Tyler Durden

Source: TTR

http://www.thetradingreport.com/2017/03 ... big-short/

[winston]

The ‘Death of Malls’ is about to get worse… Store closings expected to increase 33% in 2018

Source: Business Insider

http://thecrux.com/death-of-malls-12000 ... d-in-2018/

[behappyalways]

NYC Office Glut Hit Highs Not Seen Since Dot-Com Bust
https://www.zerohedge.com/markets/nyc-s ... t-com-bust

[behappyalways]

Commercial Landlords Fret As Office Occupancy Still Stubbornly Below Pre-Pandemic Levels
https://www.zerohedge.com/economics/com ... mic-levels

[winston]

In Commercial real estate, we’re now seeing a slowdown

For the first time in more than a year, commercial real estate is cooling.

After 13 consecutive months of increase, commercial-property sales fell 16% in April year-over-year.

The sector has been red-hot since late 2020, as investors used historically low interest rates to buy up properties in expectation of a post-Covid rebound.

The most in-demand assets were multifamily and industrial properties. Those sales helped offset slower office-building sales, which were dragged down by remote work.

While a slowdown was logical based on climbing rates, what’s surprising is the speed of the sudden reversal.

From The Wall Street Journal:

April’s 16% decline in sales marked an abrupt turn from March, when total commercial property sales rose 57% from the same month a year before.

“The speed of that transition is shocking,” said Jim Costello, chief economist at MSCI Real Assets. A drop in sales can be an early indicator of stress in real-estate markets because prices are usually slower to change, he added.

Moreover, the prospect of a slowdown in the U.S. economy later this year or next is weighing on sales because it could lead to lower office, retail and apartment rents, analysts said.

The WSJ article points toward considerably higher interest rates as behind much of the reversal. The yield on the 10-year Treasury note, which a common benchmark for commercial mortgages, is up 99% in 2022 (and up 451% since August of 2020).

Source: Investor Place

[behappyalways]

There's An Amazing Glut Of Office Space In Every Major Metro Area
https://www.zerohedge.com/economics/the ... metro-area

[behappyalways]

NYC Office Space Glut Made Worse By Remote Work As Older Towers Face High Vacancy
https://www.zerohedge.com/markets/nyc-o ... gh-vacancy

[behappyalways]

“The era of cheap capital is over.”
“Cost of capital has become very expensive with tremendous velocity.”
https://mobile.twitter.com/UrbanKaoboy/ ... 6847499266


Fixed-income fund flows are even worse:

“Bond markets are effectively closed.”
Bank debt markets are still open but at significantly elevated costs.

Advice from a REIT operator:
“DO NOT WAIT TO ADDRESS YOUR 2023/2024 MATURITES."

https://mobile.twitter.com/UrbanKaoboy/ ... 1601345538