I get a ton of online CRE newsletters, deal summaries, rent/sale reports, finance/lender updates, and general news of the day information. And for those who know me, my background is in distressed, REO, and value add real estate. One of the most exciting aspects of CRE for me is the truly cyclical nature of the business. It’s never boring and it’s always a challenge in determining where the market, pricing and acquisition opportunities are going to land. As I said, never boring. Of late, the number of articles, opinions, editorials, and prognostications addressing CRE distress has been close to overwhelming. And what I find truly surprising are the vastly varied opinions as to the depth and breadth of distress. The attached provides an audio update addressing the topic. It is provided by John Chang/Senior Vice President and National Director – Research and Advisory Services. John usually nails it. But this time I’m not so sure. The critical element in John’s reasoning is the definition of ‘distress,’ which he claims is nearly as varied as the number of opinions on the level of distress. He’s right on that count. As you review articles and updates focus on the author’s definition of distress. But given ALL of that, I believe that the shear volume of loans coming due in the next few years ($2.20 trillion between January 2024 – December 2027) will create distress if only from those loans that were originated when interest rates were sub-3.0% or even sub-4.0%. In today’s rate environment, many of those loans secured by properties simply won’t pencil as a refinance or as option in securing new debt. I hope I’m wrong. Time will tell.   

 

 

Svikhart & Associates, a Salt Lake City-based real estate services company, focuses on asset management, brokerage listings and sales, and all aspects of a multifamily investment. Specific diligence regards property operations and strategies to maximize asset performance and value. Additionally, the firm assists owners regarding economic, financial and market factors that impact returns on investment. The firm targets ‘Mid-Tier’ assets which it defines generally as 10-to-60-unit properties.

 

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