Commercial real estate pain persists for regional banks
The bear case argued is that commercial real estate remains a major pain point for banks, with older properties trading at significant discounts that will wipe out equity and trigger lender losses.
The argument
The guest argued that despite claims of no 'doom' in commercial real estate, private losses are real and hidden, with properties in cities like Chicago and San Francisco seeing dramatic rental concession pressures. While premium properties in premium locations may have bottomed, regional banks below $50 billion in assets are expected to show higher levels of delinquency.
The thesis, stress-tested
✓ What validates it
- ✓Higher levels of delinquency reported by banks below $50 billion in assets in upcoming quarters
- ✓Continued downward valuation adjustments on private REIT assets and CMBS transactions
▸ Risks discussed
- ▸Premium properties in premium locations are holding up and may have already bottomed
- ▸The largest banks tend to play only in very premium assets, insulating them from the worst losses
Hear it yourself
"Commercial real estate is still a big pain point for many banks, and it will continue. Good properties, you know, the new stuff on Park Avenue around Jamie Dimon's headquarters are going at premium prices. But everything else, older properties, no matter where you look around The United States, are trading at a significant discount."
00:00 / 00:21
AFFILIATE LINK · ZORTIX MAY EARN A COMMISSION · NEVER A RECOMMENDATION TO TRADE