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June 29, 2023 | Repurposing and Repricing Real Estate

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel ( Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog:

Between 2010 and 2022, increasingly slack monetary conditions added trillions to the global money supply, and it was all looking for something to do. Some flowed into ideas and efforts to improve life on Earth. A lot more was thrown at unproductive, counter-productive and mathematically challenged pursuits. Private and public investment funds ballooned on the inflows, and the real estate sector was a massive beneficiary. Now, those malinvestment conditions have rapidly unwound.  A new report from Moody’s Investors Service highlights trouble in the private credit space:

“With monetary policy tightening, economic growth stalling and less capital flowing into risk assets, there are likely to be rising defaults among private credit borrowers,” the report said.

At the same time, the tighter financial and economic conditions are expected to curtail the flow of capital into private markets, Moody’s said: “Higher yields on traditional fixed-income assets will create more competition for private credit.”

Private equity is also levered to the moon on real estate and related securities. Most have so far avoided reporting losses by not marking their assets to market value and closing redemption windows. Now mark-to-fantasy is starting to end in defaults and sharp losses for the sector. Repurposing bricks and mortar is the new normal. Pickleball anyone? Lower rents mean lower property valuations. Even mainstream media is picking up on the story (and it’s not just happening in America):

Commercial real estate is facing major pressure as vacancy rates grow across the US. CNN’s Vanessa Yurkevich reports on how companies and landlords are being forced to get creative as spaces sit empty.Here is a direct video link.

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June 29th, 2023

Posted In: Juggling Dynamite

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