Today’s interview is a deep-dive into commercial real estate (CRE), an asset class which includes office, multifamily housing (apartments), hotels, data centers, malls, and more.

Jack welcomes John Toohig, Head of Whole Loan Trading at Raymond James, Thomas LaSalvia, Head of Commercial Real Estate Economics at Moody's Analytics, and Victor Calanog, Manulife’s Managing Director & Global Head of Research and Strategy, Real Estate Private Markets, for a wide-ranging discussions on the challenges and opportunities within CRE, with a focus on how the recent interest rate shock has impacted property values, cash flows, interest expense, and other key metrics in the CRE world. Filmed on August 30, 2023.
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Today’s interview is sponsored by Blockfills, a crypto trading solutions and financial technology firm. To begin your onboarding process, visit https://blockfills.com/open
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Follow “Let’s Talk Loans” on LinkedIn: https://www.linkedin.com/feed/update/urn:li:activity:7103476860633718784/
Follow Moody’s CRE Insights: https://cre.moodysanalytics.com/insights/
Moody’s CRE piece on CMBS Office Loan Maturity: https://cre.moodysanalytics.com/insights/cre-news/ma-cre-office-loan-maturity-monitor-office-payoffs-significantly-lag-other-property-types/
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Timecodes:
(00:00) Introduction
(08:15) Payment Shock For Real Estate Funded With Debt Before The Fed Raised Rates
(11:02 Maturity Defaults Are On The Rise
(13:25) Office Sector Is By Far Facing The Biggest Challenges Vs. Other CRE Compenents
(19:22) Who Owns The Equity In These CRE Deals?
(22:25) Gap Between Private Valuations and Public Valuations
(25:51) Higher For Longer Is Exponentially Increasing Debt Costs For Real Estate
(30:03) State Of The Secondary Market For Real Estate Loans
(35:14) Cash Flows Matter More Than "Loan-To-Value"
(40:08) There's A Hesitation Right Now For Institutions To Take Losses
(42:27) Odds Of A True Recessions vs. A "Slow-Cession" (and Soft Landing & No Landing)
(45:35) How Common Is Interest Rate Hedging Among Leveraged Real Estate Investors?
(48:01) Slowdown In New Originations For CRE Loans
(52:46) Fundamnetals Of Multifamily (Apartment Buildings)
(01:01:05) Negative Leverage In The MultiFamily Market
(01:07:31) Insurance Costs Are Skyrocketing
(01:10:54) Retail (example: Malls) And Hospitality (example: Hotels)
(01:16:45) China
(01:20:28) Closing Thoughts On U.S. Banking System
(01:22:52) Conclusion
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Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.