Commercial Real Estate Market Distress and Recent Sales

Commercial Real Estate Market Distress

Amid concerns about landlords struggling to pay off mortgages on vacant office buildings, Wall Street banks have started unloading their portfolios of commercial real estate loans. This move is a clear indicator of the growing distress in the commercial real estate market, exacerbated by high interest rates and low occupancy rates due to the pandemic impact.

Recent Sales and Transfers

• An affiliate of Deutsche Bank and another German lender sold the delinquent mortgage on the historic Argonaut office complex in midtown Manhattan to the family office of billionaire investor George Soros.
• Goldman Sachs offloaded loans on a portfolio of troubled office buildings in major cities like New York, San Francisco, and Boston.
• CIBC completed a $300 million sale of mortgages on a collection of office buildings across the country in May.

“What you are seeing right now are one-offs,” said Nathan Stovall, director of financial institutions research at S&P Global Market Intelligence. He noted that banks are increasingly looking to reduce their exposures to troubled commercial real estate loans. Despite the recent sales, the volume and value of these distressed loans being offloaded are relatively small compared to the total $2.5 trillion in commercial real estate loans held by all U.S. banks, as reported by S&P Global Market Intelligence.