Important Takeaways:
- The tremors rattling US commercial real estate are spreading to other countries and sectors, and threaten to escalate into a financial earthquake as refinancing deadlines loom.
- Barry Sternlicht, a billionaire real estate investor and Starwood Capital’s CEO, recently predicted $1 trillion of losses on office properties alone.
- More than $900 billion, or 20%-plus of the total debt owed on US commercial and multi-family real estate, will mature this year, Bloomberg reported this week. Borrowers may have no choice but to refinance at much higher interest rates, or sell their properties at a big discount.
- Moreover, the European Central Bank has threatened to impose steeper capital requirements on lenders unless they take commercial real estate risks seriously, sources told Bloomberg.
- At the same time, some Chinese investors are rushing to sell foreign real estate at discounts of 45% or more, in an effort to free up cash as they weather a worsening property crisis at home.
- Fears were reignited this month after New York Community Bancorp abruptly cut its dividend, set aside some $500 million to cover bad debts, and revealed a surprise quarterly loss that it blamed on just two troubled loans.
- Investors promptly sent NYCB stock down 60% in five days, and it’s still trading at two-decade lows.
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