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You are correct, my bad! Updated my post.

by MrFoof 3y ago

quickthrowman 3y ago
Based on this tenant space listing [0] the building appears to have around 40k sq ft of leasable space. That works out to around 3.25 years of rent assuming 40k sq ft leasable at $32/sq ft. It’s definitely not a good sign for commercial office space, that’s for sure. US 30 year bonds are yielding 5%, that’s much more attractive than a half-leased Class B office tower with an 8% mortgage right now. [0] https://bradvisors.com/wp-content/uploads/2019/04/33-41WestSt_Brochure040419_lo-.pdf https://bradvisors.com/wp-content/uploads/2019/04/33-41WestS... P.S. Sorry about the nitpicking :)
- toomuchtodo 3y ago
  Consider that a lot of these mortgages are not yet at 8%. There is about $1.5T in commercial debt coming due before 2025. https://archive.ph/ku9Xr https://archive.ph/ku9Xr | https://www.bloomberg.com/news/articles/2023-04-08/a-1-5-trillion-wall-of-debt-is-looming-for-us-commercial-properties https://www.bloomberg.com/news/articles/2023-04-08/a-1-5-tri...
  - quickthrowman 3y ago
    My comment about 5% 30 year Treasury bonds being more attractive than mid tier office buildings financed at 8% was referring to someone making a current investment decision. The refinancing of $1.5T in CRE before 2025 is going to be a bloodbath for regional banks, hopefully we don’t have multiple SVB situations as a result. For anyone unfamiliar with CRE financing, a typical loan might have a term of 5-10 years and an amortization schedule of 20-30 years. A lot of loans that were taken out when the prime rate was 0-2% are now going to have to be refinanced when the prime rate is 5.25% and occupancy rates have dropped, meaning the building is worth less than it was previously and also the monthly payments are higher as a result of the higher interest rates. Lots of building owners are going to walk away and the banks will have to repossess and resell a bunch of CRE.
    - toomuchtodo 3y ago
      Apologies for talking past each other. Agree with your analysis.

You are correct, my bad! Updated my post.

by MrFoof 3y ago

You are correct, my bad! Updated my post.

Based on this tenant space listing [0] the building appears to have around 40k sq ft of leasable space. That works out to around 3.25 years of rent assuming 40k sq ft leasable at $32/sq ft. It’s definitely not a good sign for commercial office space, that’s for sure. US 30 year bonds are yielding 5%, that’s much more attractive than a half-leased Class B office tower with an 8% mortgage right now. [0] https://bradvisors.com/wp-content/uploads/2019/04/33-41WestSt_Brochure040419_lo-.pdf https://bradvisors.com/wp-content/uploads/2019/04/33-41WestS... P.S. Sorry about the nitpicking :)

toomuchtodo 3y ago
Consider that a lot of these mortgages are not yet at 8%. There is about $1.5T in commercial debt coming due before 2025. https://archive.ph/ku9Xr https://archive.ph/ku9Xr | https://www.bloomberg.com/news/articles/2023-04-08/a-1-5-trillion-wall-of-debt-is-looming-for-us-commercial-properties https://www.bloomberg.com/news/articles/2023-04-08/a-1-5-tri...
- quickthrowman 3y ago
  My comment about 5% 30 year Treasury bonds being more attractive than mid tier office buildings financed at 8% was referring to someone making a current investment decision. The refinancing of $1.5T in CRE before 2025 is going to be a bloodbath for regional banks, hopefully we don’t have multiple SVB situations as a result. For anyone unfamiliar with CRE financing, a typical loan might have a term of 5-10 years and an amortization schedule of 20-30 years. A lot of loans that were taken out when the prime rate was 0-2% are now going to have to be refinanced when the prime rate is 5.25% and occupancy rates have dropped, meaning the building is worth less than it was previously and also the monthly payments are higher as a result of the higher interest rates. Lots of building owners are going to walk away and the banks will have to repossess and resell a bunch of CRE.
  - toomuchtodo 3y ago
    Apologies for talking past each other. Agree with your analysis.