ENCOURAGING ANGELS: Protect Your Assets and Savings Now Before the Unfolding Wall Street Mortgage Downfall has You Starring in Your Own Real Life Financial Horror Movie

Image Credit: IMDB

By Stan Szymanski

I have no experience in Commercial Real Estate (CRE) except that when I was an investment broker I always worked in some concrete structure that was most likely financed by a commercial real estate mortgage. The once great story of CRE is falling apart.

On Jan. 17 The New York Post broke a story that Blackrock has defaulted on its Manhattan property that it had purchased in 2014 for more than 600 million dollars.

Originally appraised for $605 million, the property had steadily lost value since 2014. According to Bloomberg, Blackrock stopped paying on the mortgage in 2022. The mortgage was put into special servicing for the last 18 months.

Then came the New York Post report mentioned above that the $308 million face value of debt was put on the market for just $150 million dollars.

According to Global Capital the occupancy rate at the property on Broadway was only a meager 7.4% as of September 2023.

With an occupancy rate of less than 1/10th of the capacity of the building-how can any proposed investor in the debt of this ‘white elephant’ hope to make a profit on their investment? The CMBS (Commercial Mortgage Backed Security) that securitizes the building is being put on the market at 51% off and the structure was allegedly already overvalued by $100 million at the time of purchase:

…’It was reportedly full of tenants paying below-market rents, with a source telling The Post that EQ “overpaid for the building by at least $100 million.”…(New York Post)

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To me that means that Blackstone overpaid by approximately 16.7% or is another way of saying that the architecture only had a market value of $500 million. That is another way of saying that the $308 million loan that Blackrock defaulted on and is now being offered at a 51% discount at $150 million should be worth substantially less than its current offering price. Add on top of that a paltry 7.4% occupancy rate to support the cash flow on the premises and how does this work out for anybody?

The sum of all of this looks catastrophic IMHO.

Not only is this a huge problem for the Commercial Real Estate (CRE)  market…what about all of the pensions that own CRE through investments trusts and other investment vehicles?

The movie ‘The Big Short’ described the horrible underbelly of the residential real estate market and the cascading effect of all of the financing built on top of that lie that culminated in the unfolding of the Global Financial Crisis 2007-2008. Only the massive printing of money by the Federal Reserve kept the worldwide financial system from total collapse.

The next year (2009) was the first summit of the BRICS nations.

…’At their first summit in 2009, the BRIC states affirmed their commitment to a multipolar world order and global non-interventionism and called for a new global reserve currency as an alternative to the U.S. dollar.’…(Britannica)

The rest of the world officially became sick of the United States exposing the globe to its practice of financial unwellness and largesse.

In 2024 the American financial markets have a new Real Estate calamity which could well become a catastrophe known as CMBS (Commercial Morgtage Backed Securities). With the unveiling of the Blackrock situation, the scope of this problem is now playing out in a most unfavorable manner.

This will, no doubt after it plays out, spawn another celluloid recap of all the terrible tidbits of the unfolding of an American CMBS debacle.

It may very apt to called ‘The Bigger Short’ as any attempt to bailout a failed financial system by the same entity (the Fed) will, IMHO, end badly. The Fed has trillions more on its own balance sheet than back during the 2007-08 and has already made provision for a ‘Central Bank Digital Currency (CBDC)’ to literally print worthless fiat currency into infinity without accountability and to imprison the American citizen in the completely controlling clutches of its CBDC.

The people who actually made money in ‘The Big Short’ bet against the financial system. Perhaps this is a theme that all of us should consider at this time with things like commodities, precious metals, food, water, energy, shelter and protection. This is not financial advice.

Cue the 2024 Artificial Intelligence generated image of Steve Carell…

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Stan Szymanski (or Encouraging Angels) is not a medical doctor. This is not medical advice. In all matters pertaining to the health and care of a human being consult a medical doctor. This is not legal, financial or personal advice. Consult appropriate professionals in those fields for that type of advice.