By Peter Grant | Wall Street Journal
Turmoil in commercial real estate is sending jitters through regional banks and other lenders. But one group is pleased with the turbulence: investors sitting on piles of cash they raised to scoop up distressed properties.
Many of these investors have been stockpiling funds since early in the pandemic. They have been frustrated because most property owners haven’t agreed to sell at big-enough markdowns, in large part because lenders have been willing to offer loan extensions and modifications.
Now, that is starting to change. Lenders are stepping up the pressure on owners of office buildings crippled by remote work. They are getting tougher on hotel owners who have neglected repairs. They are calling in loans to apartment-building owners who fell behind on construction schedules owing to supply-chain shortages.
Soaring interest rates are the main reason. Property owners who used floating-rate debt or bought properties before the interest-rate shock began in 2022 are struggling to afford higher debt-service costs, which often are more than 4 percentage points higher.
