The lenders that are getting caught by the defaults of big office towers and multi-family properties that have come to my attention and that I have discussed so far were investors, primarily holders of Commercial Mortgage-Backed Securities (CMBS) and specialized CRE lenders – not US commercial banks their turn will eventually come.ĥ0% off the 2016 valuation. And it’s the big landlords that are sending the jingle mail to the lenders. Some of the future sales come with a twist: The defaulted loans get sold, not the properties, and the new holder of the loan can then take possession of the building and do something different with it. In Manhattan, sales of office buildings have collapsed from $5 billion in Q1 2022 to just $489 million in Q1 2023, the lowest sales since 2009, according to MSCI, cited by the Wall Street Journal. Until these sales occur, no one really knows what older office towers are worth in the new era of working from home and vacant office towers. The market for office towers is starting to thaw just a tiny bit, and some sales have now occurred or are on the horizon, with massive markdowns that serve as benchmarks for future deals. So far, investors and specialized lenders have been on the hook, not commercial banks. Whoever buys the defaulted loan gets the tower.
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