Its Over, page-22879

....and Wall St is buying into Regional Banks and REITs?

WSJ: "Real-Estate Meltdown Strains Even the Safest Office Bonds".

Sobering for Aussie private credit investors mostly exposed to commercial real estate:

"The commercial real-estate meltdown is spilling over into the bond market. Defaults are mounting in a favorite Wall Street mortgage-bond investment, setting off fresh alarms about the future of offices and malls in cities across the U.S.

There are about $260 billion of the deals, known as single-asset, single-borrower bonds, held by investors such as banks, insurers, pensions and mutual funds. Landlords, often private-equity firms, used that money to purchase skyscrapers, shopping centers and other properties.

Much of the debt is coming due and refinancing markets are frozen for many office and retail landlords. Some are defaulting even before their due dates because their interest expenses soared when the Federal Reserve raised rates.

These so-called SASB bonds were meant to be ultrasafe, but the rate of loans at or near default has nearly tripled over two years, hitting 8.7% in 2024, according to data from the CRE Finance Council, a trade group. The losses are particularly jarring for investors because credit-rating firms initially gave many of the bonds triple-A ratings—higher than even U.S. Treasury bonds.

The financial models behind the ratings never forecast property prices falling below the value of the debt. When the pandemic gutted demand for offices, private-equity firms abandoned near-vacant buildings and their debts, leaving bondholders holding the bag.

Owners of a bond backed by a Blackstone-owned building took a loss after the property was sold in April, the first such impairment ever, according to research by Barclays. The market is headed for more turbulence as more triple-A bonds get hit, analysts say..."

https://x.com/cjoye/status/1813773346628350117