New York’s CRE woes could spread nationwide: investors

$3B in loans backed by NYC commercial real estate is delinquent

New York /
Oct.October 19, 2020 12:11 PM
Investors worry that New York City’s battered commercial real estate sector is indicative of larger issues nationwide with hotels, restaurants and retail. (iStock)

Investors worry that New York City’s battered commercial real estate sector is indicative of larger issues nationwide with hotels, restaurants and retail. (iStock)

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


Related Articles

arrow_forward_ios
Nationally, just under one-third of office workers have returned to the office spaces they occupied before the pandemic. (iStock)
Employers face uphill battle luring staff back to the office
Employers face uphill battle luring staff back to the office
The Closing: Janice Mac Avoy
The Closing: Janice Mac Avoy
The Closing: Janice Mac Avoy
Mack-Cali Realty CEO Mahbod Nia and River Centre in Red Bank (Mack-Cali)
Mack-Cali offloads Red Bank office complex for $84M
Mack-Cali offloads Red Bank office complex for $84M
Washington Prime Group CEO Lou Conforti (Twitter)
Washington Prime Group files for Chapter 11 bankruptcy
Washington Prime Group files for Chapter 11 bankruptcy
Hamed bin Zayed Al Nahyan (Getty)
Pandemic squeeze forces Abu Dhabi fund to reassess real estate exposure
Pandemic squeeze forces Abu Dhabi fund to reassess real estate exposure
Renderings of Greenpoint Landing in Greenpoint, 141 Willoughby Street in Downtown Brooklyn and 45-57 Davis Street in Long Island City (Photos via OMA, SLCE Architects and J Frankl Architects)
These were the top outer-borough loans in May
These were the top outer-borough loans in May
SL Green CEO Marc Holliday (Getty, Sl Green)
SL Green shareholders cry foul on CEO bonus
SL Green shareholders cry foul on CEO bonus
The New York Life Sciences and Biotechnology Center at First Avenue and 41st Street (NY Life Sciences)
Life sciences leasing breaks annual record in five months
Life sciences leasing breaks annual record in five months
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...