Bloomberg Briefing Brings It Home, Even Top-Rated Bonds Backed by Commercial Real Estate Taking Losses

“For the first time since the financial crisis, investors in top-rated bonds backed by commercial real estate debt are getting hit with losses. Buyers of the AAA portion of a $308 million note backed by the mortgage on a building in midtown Manhattan got back less than three-quarters of their original investment after the loan was sold at a steep discount. It’s the first such loss of the post-crisis era, says Barclays. As for the five groups of lower ranking creditors? They got wiped out. Market watchers say the fact the pain is reaching all the way up to top-ranked holders, overwhelming safeguards put in place to ensure their full repayment, is a testament to how deeply distressed pockets of the US commercial real estate market have become. “These losses,” warns Barclays strategist Lea Overby, “may be a sign that the commercial real estate market is starting to hit rock bottom” BloombergBusiness May 23, 2024  Like I have been telling my readers for months, even though at times we are at the bottom we may be here for quite some time, bouncing along the bottom, waiting for interest rates to come down, waiting for banks to once again respect office buildings, and waiting for the supply off offices to dimmish as over time tens of millions of square feet are demolished to make way for housing, slowing allowing the remaining buildings to be repopulated with employees actually coming to work.