Tom Barrack says RE industry verging on collapse over rent, mortgage waivers

Colony Capital CEO warned last month of impact pandemic could have on commercial mortgage market

TRD NATIONAL /
Apr.April 27, 2020 04:30 PM
Colony Capital CEO Tom Barrack (Photo by Misha Friedman/Getty Images)

Colony Capital CEO Tom Barrack (Photo by Misha Friedman/Getty Images)

The country’s real estate market is in chaos and on the verge of collapse.

That’s according to Colony Capital CEO Tom Barrack, who said the industry was in such dire straits because the government is letting renters and homeowners skip payments due to the coronavirus. He made his comments in an interview with Bloomberg Television Friday.

Lenders and landlords can normally use the court system to enforce rent and interest payments, but they do not have that option at the moment with millions out of work and much of the country still under lockdown. Some banks like JPMorgan, are pulling back from mortgage lending by tightening standards.

In late March, Barrack posted a white paper to Medium warning that the country’s commercial mortgage market was teetering on the edge because of the pandemic and subsequent economic shutdown. Some of his proposals, such as market liquidity from the Federal Reserve and new accounting rule delays were adopted, but others like a halt on margin calls by banks were not.

Colony’s real estate portfolio had a roughly $50 billion valuation at the end of 2019, and Barrack said the number of tenants who paid rent in April was “amazingly good,” with a drop of just 3 to 5 percent from normal levels; he expects fewer tenants will remain current for May.

He said that Colony has a good amount of liquidity and should survive the fallout from the pandemic.

“The people who’ll be crushed are the people who own the equity, the people who own bonds and debt, the pensioners,” he told Bloomberg. “At the end of the day, the government is going to have to step in and subsidize it all if people don’t go back to work.” [Bloomberg] — Eddie Small


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