Investors are betting that trouble in New York City’s commercial real estate market will spread nationwide.
Prices for debt backed by hotels, restaurants and retail in New York City — among the hardest-hit sectors as the pandemic emptied out tourist destinations this year — have fallen and new loans have slowed, leaving bankers and the real estate industry bracing for further declines, the Wall Street Journal reported.
Daniel McNamara, a principal at MP Securitized Credit Partners, said he is betting prices for some CMBS indexes will fall, according to the Journal.
“Distress in financial markets was all about residential mortgage-backed securities in 2008 and energy in 2015,” McNamara told the Journal. “In 2021 it will be all about commercial real estate and the securities linked to it.”
Citing Trepp, the Journal reported that more than $3 billion worth of loans backing commercial property in the five boroughs are delinquent, and loans in creditor negotiations amount to an additional $4 billion.
Other investors say trouble may be more property-specific. For example, a subsidiary of Brookfield Asset Management in September successfully placed a $1.8 billion loan backed by One Manhattan West into CMBS. The 67-story tower is more than 90 percent leased with major tenants including consulting firm Accenture and the National Hockey League.
“Any property that looks destabilized needs to lease up,” Matt Salem, head of real estate credit at KKR, told the Journal. “That doesn’t mean we’re redlining parts of New York City, but we need to make sure there’s durable cash flow for the near future.” [WSJ] — Akiko Matsuda