- Jonathan Poyer
Commercial Real Estate Warning Signs
Not all aspects of real estate are in a good place right now, especially for investors. For instance, there are a lot of risks in commercial real estate. For REITs and other investment vehicles, there are serious issues relating to marked-up illiquid assets. Meaning, until there are redemptions, investors do not really know the value of the asset they are owning. Hence, we are seeing some gating of redemptions and other significant mark-downs that come about "unexpectedly".
Check out this regional article:
A Flood of Defaults Swamps Big Names and Big Properties, Especially Offices – Commercial Observer
From the article:
The flood underscored the reality that, whatever the economic recovery from the pandemic, many commercial landlords are struggling to make their mortgage payments. In recent weeks, a number of prominent property owners have defaulted on loans, gone into special servicing, or otherwise shown signs of distress.
Tough times are especially pronounced in the office market, which is reeling from workers’ embrace — and employers’ acceptance — of work-from-home arrangements. Once viewed as a temporary measure forced by the pandemic, virtual work has outlived the era of social distancing and mask mandates.
That’s causing considerable trouble in the office sector — and the dam holding back default filings clearly has burst.
Here are a couple of additional examples:
PIMCO office landlord defaults on $1.7B loan | Bloomberg
Private REITS from Blackstone, KKR, others are limiting redemptions| WSJ
Here is a potential framework to think about investing in real estate: