CMBS

Immediate-Sky9959

You obviously really did not understand the ramifications of Bear's portfolio. Over leveraged at 145% in MBS, CMBS, CMO's, IO/PO's, Whole Loans, CDO's, SubPrime mgts. Things got progressively worse in that space, REPOs were requiring more and more collateral for the same money's. When Merrill seized $1 trl in assets from one of Bear's funds,in 2007, it became apparent how Bear was carrying them was less than 10% of what they were actually worth in the open market. Merrill had $1trl in assets that they finally sold off in the neighborhood of $120mm. Then in July of the same year, two subprime hedge funds had lost nearly all of their value amid a rapid decline in the market for subprime mortgages. Why don't you try and point out the similarities?

FlounderBubbly8819

And I’ve worked in CMBS for 7+ years so I’m very familiar with how these deals work too. Go ask your bosses who worked in RMBS before the GFC how those deals lined up compared to the ones today. I guarantee you the credit quality is substantially better. Fannie Mae RMBS default rates have topped 1% since 2009 and for good reason. The industry has much tougher underwriting and credit standards than a generation ago

FlounderBubbly8819

You’re trying to force a one-to-one narrative where it doesn’t fit. Yes, cycles exist but saying “what happened in 2008 residential is happening now in commercial” is surface-level at best. In 2008, residential was massively overleveraged with structurally unsound loans, fraudulent underwriting, and systemic exposure through opaque derivatives. That was a household-debt-driven collapse.  Commercial real estate today faces headwinds but it’s not systemically embedded in bank balance sheets the same way. CMBS exposure is more limited, and most loans are with regional banks or private lenders, not global institutions. As for pensions “buying junk”, yes they hold a mix of risk assets, but they’re not loading up on synthetic CDOs like it’s 2006. Risk exists, but this isn’t a carbon copy of last time. It never is. Cycles matter, but analysis needs to go deeper than “things go up, so they must crash”

Imjusherefotiddies

As much as I would like to add weight to rating agencies, I wonder if they still have the same value specially after finding out that these ratings can be brought and paid for like how CMBS and MBS securities were kinda rated during 08-09.

TheGoodCod

Got a migraine but here are some ideas. (if you go to archive.org you can get access to any of these articles you don't have access to) https://www.forbes.com/sites/markfaithfull/2025/04/28/american-consumers-turn-to-buy-now-pay-later-for-groceries-as-high-costs-bite/ >American shoppers are increasingly using buy now, pay later loans to buy groceries, and more people are paying bills late, according to a spending intentions survey from Lending Tree released Friday. https://www.bloomberg.com/news/articles/2025-03-06/late-car-loan-payments-auto-delinquencies-spike-to-highest-level-in-decades https://www.multihousingnews.com/2025-cmbs-delinquency-rates/#:~:text=The%20Trepp%20CMBS%20Delinquency%20Rate,from%20%2436.0%20billion%20in%20February. >The Trepp CMBS Delinquency Rate ticked back up in March 2025, with the overall delinquency rate increasing 35 basis points to 6.65 percent. https://www.bloomberg.com/news/articles/2025-02-13/us-consumer-debt-delinquency-hits-highest-in-almost-five-years https://www.bloomberg.com/news/newsletters/2025-04-08/financing-standstill-triggers-alarm-for-debt-dependent-companies .

LiteratureOwn1960

A 30% tariff on Chinese exports would definitely make things more expensive for the average person. I don’t have the exact numbers, but it’s pretty clear that a good chunk of everyday stuff comes from China electronics, clothes, household goods. If those prices go up 30%, it’s definitely going to hit people’s wallets. And the whole pre market hype feels like it’s just masking real problems like mass layoffs, the office CMBS market hitting 2008-level delinquencies. No one’s really talking about that, but it’s there, bubbling under the surface

MindMugging

Based on your description, I don’t think you’re incorporating majority of the risks. Not that I’m saying what you’re thinking is completely wrong. Fair disclaimers: I don’t know the company DX and I don’t usually dig into REITs. Just know the high level methods in analyzing them. - DX invest in mbs and cmbs. Don’t know if they hold physical buildings or just paper. All I can think about is exposed to personal mortgage delinquencies and office buildings delinquencies - stable post covid. CMBS contracts generally runs 10 year contract. Have we seen most the contracts roll over yet? Are there any contract cliffs? - personal mortgage delinquencies is way too complicated to get into. I’m going to assume we aren’t seeing another GFC - general REIT. Dividends is nice but 16% + a 2% price return is pretty much all the value for it. Imagine a company had a ROE of 18%, which is not rare, and everything else held constant. The value of the company go up 20% so then wouldn’t the market cap go up by that same amount? Like I said everything else like supply/demand/irrational-investor aside. - so what’s the difference? You do you, and adding reit is not a bad idea for diversification but I’m just adding this to get you to think about what dividend means in relationship to the company as a whole.

anon_lurk

Well we are seeing some problems with commercial real estate, so if they are all wrapped up in CMBS the same way then you better buckle up.

HarkansawJack

CMBS is in big time trouble. All major banks are holding massive underwater CMBS delinquencies

TomatoSpecialist6879

There's no trade brother, not unless the absolute top level people decide to push junk bonds onto national banks not part of the big boys table and let them die on purpose. Because just like 2008, they all know what's happening and it's crime all over, but the administration and the Feds refuse to let the sky fall. I'm not THAT terminally online, but online enough that I remember seeing you post since at least 2022. You should remember the Q1 2023 bank run; people found the SVB short play because those idiots loaned money to FTX. Their collapse led to a bank run hunting, that's when CMBS came into the spotlight. FRC collapse was suppose to be the first of many, and was suppose to cause an '08 level recession. But they just dissected the assets(aka the toxic debt problem) and have different banks each take one part of the asset to equally share the problem and made it all disappear. I'm guessing with the recent renewed interest in CMBS again, we may or may not see at least one bank get pushed out to be the scapegoat for the year. [Check the latest list for banks with most CMBS exposure](https://www.americanbanker.com/list/20-u-s-banks-with-the-largest-commercial-real-estate-loan-volume), then focus only on the national banks because they have the least amount of ways to escape from bank runs(no foreign assets for them to draw from). EWBC and OZK almost got pulled down by FRC crash, who knows if they can survive this time round when their names are on the list.

TomatoSpecialist6879

I've seen people talk about CMBS crash since the pandemic started in 2020, peaking in 2023 when DDs about playing the crash keep popping up all over because of China's real estate meltdown. Even Burry talked about it and saying "this will be the catalyst for US market crash". Truth is this only affects 1%ers and banks, so nobody cares because they'll just keep kicking the can down the road like they did for the past 5 years. There may or may not be cracks, but honestly all the banks have been quietly offloading their mortgage portfolios, plus they'll just scape goat a medium size bank to take the fall. I still remember First Republic died in April 2023 just because of CMBS RUMORS which caused a bank run, made like 400k off puts thanks to Burry posted that list of banks ordered by who has the most CMBS loans.

MillionBEAR_

BREAKING: The delinquency rate on commercial mortgage-backed securities (CMBS) for offices rose to 10.3% in April, near the highest on record. Delinquency rates on these loans are now up 9 percentage points over the last 3 years By comparison, delinquency rates hit 10.7% at the post-2008 peak. The multifamily delinquency rate surged 113 basis points in April, to 6.57%, the highest since 2015. The overall US CMBS delinquency rate jumped to 7.03%, the highest since January 2021.

Immediate-Sky9959

NO ONE works on past numbers, not equities, Rates, options, CDX, CMBS, MBS, Treasuries, Corp.Bonds. Pay attention and maybe you'll learn something

IvoShandor

These are CMBS loans, not bank or institution loans. CMBS loans are securitized an sold off in bonds. (like he Big Short, but for CRE) Bond holders will either not get their payment or the special servicer who steps in "extends and pretends" with the borrowers. Basically they just extend it, ride it out rather than going through the default process. That's their bail out.

Books_and_Cleverness

You’re talking about retail and industrial which are generally super strong right now. The CMBS defaults are largely driven by office which sucks ass.

zer0sumgames

This is a symptom of horrible lending decisions made within the past 5-7-10 years. CMBS lenders generally issue higher interest rate debt at market-high valuations. So if the owner says his building is worth $15mm and he can produce a proforma and an appraisal that supports that valuation, then the CMBS lender will lend at that valuation. But many commercial loans--office loans in particular--rely on maintaining a certain amount of occupancy. So they underwrite the whole thing assuming 95% occupancy or something like that, and the loan is a term loan of 5, 7, 10 years or so. But as we all know, office occupancy declined precipitously in covid, and the borrowers (who cashed out on huge valuations) aren't collecting rents sufficient to meet the debt service coverage ration. And so they go into cash management, which means that the CMBS's vampire "special servicers" take over and charge exorbitant fees, and default interest for short payments, and shit like that. It begins a death spiral for the building. And behind the CMBS lenders are the people I like to call the "council of vampires." These are the bond holders. These CMBS lenders fund their loans with pools of investors who buy a bond that guarantees a certain rate of return. These people do not negotiate. Full stop. They want their return. They are too disconnected from the property to give a shit about the borrower or the market or whatever. Gives us the return, fuck you. Default interest, fuck you! But what ends up happening is the borrower, of course, gets sucked dry. And then the lenders foreclose or take the property back through a deed in lieu of foreclosure. And then....well, that's the rub. And then what? Now these underperforming buildings are owned by teams that don't really understand them or give a shit about them. Maybe they are sold at a loss. Maybe they try to operate them. But at the end of the day, it is the council of vampires who gets fucked. That's not a Main Street problem. That's a vampire problem. The owners who initially borrowed the money largely cashed out with their original financing agreement. They usually have some sort of personal guarantee but good luck getting at it.

Soapbox503

Think it comes down to the FED showing commercial real estate loan defaults and this chart showing only CMBS bundled deals. (I.E probably the lower credit deals get bundled, per usual)

9551HD

CMBS gonna blow the fuck up

Spy300

>BREAKING: HOTEL, MULTI FAMILY, OFFICE LOANS REACH RECORD DISTRESS LEVELS >https://cred-iq.com/blog/wp-content/uploads/2025/04/CRED-iQ-CMBS-Distressed-Rates-by-Property-Type-Mar-2025-1.png Tariffs are the dagger Spy 300

Spy300

>**BREAKING: HOTEL, MULTI FAMILY, OFFICE LOANS REACH RECORD DISTRESS LEVELS** >https://cred-iq.com/blog/wp-content/uploads/2025/04/CRED-iQ-CMBS-Distressed-Rates-by-Property-Type-Mar-2025-1.png tariffs are the dagger Spy 300

Spy300

**US ECONOMY WAS ALREADY FUK BEFORE TRADE WAR** >https://cred-iq.com/blog/wp-content/uploads/2025/04/CRED-iQ-CMBS-Distressed-Rates-by-Property-Type-Mar-2025-1.png

Spy300

He started a trade war when the economy was already tanking https://cred-iq.com/blog/wp-content/uploads/2025/04/CRED-iQ-CMBS-CRE-CLO-Distressed-Rates.png

9551HD

I can't wait for small businesses to start closing up shop, commercial real estate to be deserted, and the already stressed post-covid wfh CMBS market to absolutely implode. Global financial crisis 2 electric boogaloo!

Most-Inflation-1022

>I worked with IRS, CDS, CDX and CMBS for many years I worked with those too, in addition to CMBS, CDO, ABS, CLO, squared, cubed and synthetic versions of those, so you know that some of the securities had to had higher warehousing rates when synthetics, squared and cubed couldnt catch a bid or catch a bid at breakeven. MRL and LEH were ultimately fucked due to this, while others either got bailed out ot in case of GS had perfect hedges. My point was if banks need to HTM more Ts at 4.1 than reg environment dictates, their capital is tied into this excess since secondary wont touch 410 on 10Y. This for me is warehousing access capacity and basically being short rates WHILE waiting to AFT for some % bonds. What can happen is borrowing costs of these banks delta + vs their HTM yield which leads to lower profits which leads to more risk taking. The hedge here is short the buck vs JPY and USD. As to Powell, if he needs to raise during negative growth to prop the dollar and keep inflation in check, he will.

Slotstick

Very interesting read! This sounds very similar to SVB regarding the HTM securities portion. Please correct me if I am wrong, my understanding of your comment is: 1. That banks are carrying large losses that if were marked to market would show they are insolvent. 2. The current environment is shaping up to push rates higher while the politics try to push it lower. 3. The bond market won’t take this paper at these lower rate. I worked with IRS, CDS, CDX and CMBS for many years. I agree that, similar to AIG, the amount of leverage out there may really exceed the banks ability to lend. One of the commenters below said the whole theory is predicated on the ability for the market to accept lower rate paper to refi. I think most agree the market won’t buy at 4.1/4.2, but the part that I was confused about is how that triggers the subsequent issues and making the dollar trade profitable. In theory, the HTM book could be held and then there is no asset impairment and the banks are fine. That just becomes a waiting game assuming they can avoid any bank runs. Does the dollar trade require the bond to be sold at that lower rate or would inflation with geo political risk increasing get you to the same point? I’m not certain yet that the administration can force rates lower without Powell abdicating his responsibility. Do you see a scenario that they could? As a side note, I was thinking while writing this what’s the negative to decreasing rates. I am just thinking out loud as a thought exercise. In theory, it should cause inflation to take off. We have seen scenarios where it doesn’t, but I think most agree that if we were to lower in the current environment it would be very inflationary due to the protectionist policies being levied. This would obviously hurt the middle and lower class, but is that enough to hurt the economy in a significant manner? The middle class has been largely eroded in my opinion and there have even been some reports (albeit I have not checked their accuracy) that spending is occurring at the top 10% bracket and it makes up for the majority of consumer demand. If that is true, then it has implications for the banking sector and this analysis. It would imply the banking risks are concentrated to policies that affect that top group and would see minimal impact from policies at the cost to the lower classes. Which I think largely aligns with what the current admin is doing. I am trying to figure out the end goal for the current admin to formulate a plan so maybe this word vomit on my part has no traction. Figured I’d throw it out there and see what people’s thoughts are.

chuan_l

f you meant the " zero accountability " part ..  Then thats a special privilege reserved for the market makers. The banks and funds have T+35 clearance for FTDs , so its ample time to pull synthetic shares out of their ass. Then roll them again when the month is done ..  For the CMBS , the instrument of choice is through credit default swaps. Though these are at the banking level of investment. You could do puts on " ishares cmbs ETF " , or find out the companies or REITs that own said properties. Its something that usually doesn't have a lot of volatility ..  — Just because you asked , CMBS delinquency reached 11 % last month : \[ [https://wolfstreet.com/2024/12/31/office-cmbs-delinquency-rate-spikes-to-a-record-11-surpassing-the-peak-of-the-financial-crisis/](https://wolfstreet.com/2024/12/31/office-cmbs-delinquency-rate-spikes-to-a-record-11-surpassing-the-peak-of-the-financial-crisis/) \]

chuan_l

If you meant the " zero accountability " part .. Then thats a special priviledge reserved for the market makers. The banks and funds have T+35 clearance for FTDs , so its ample time to pull synthetic shares out of their ass. Then roll them again when the month is done .. For the CMBS , you can't directly bet against it as credit default swaps are at the bank level of investment. Though you can do puts on " ishares cmbs ETF " , or find out the companies or REITs that own said properties. Its something that usually doesn't have a lot of volatility .. — Just because you asked , CMBS delinquency reached 11 % last month : \[ [https://wolfstreet.com/2024/12/31/office-cmbs-delinquency-rate-spikes-to-a-record-11-surpassing-the-peak-of-the-financial-crisis/](https://wolfstreet.com/2024/12/31/office-cmbs-delinquency-rate-spikes-to-a-record-11-surpassing-the-peak-of-the-financial-crisis/) \]

chuan_l

The conflict of interest is also quite blatant :  For example david ingss , who is " citadel " global head of operations ..  Still sits on the DTCC board of directors ! Then the " cat nms plan " to consolidate the audit trail has been stuck in limbo since around 2012. When it was a recommendation to fix the last market crash. There is still no way to audit any NYSE trades at all .. Which also means zero accountability for " dark pool " trades ..  There are still massive amounts of illegal " synthetic " shares created. By " citadel " and pretty much all the large banks and hedge funds who now depend on it to turn a profit. Its financial fraud along with their arbitrage. Focused on stealing the silverware , while larger macro economic problems loom ..  Nobody is talking about CMBS either .. Those credit backed mortgage securities are utter junk ..  Its the same situation as 2008 , and will blow up ! Half of new york is now shuttered and businesses are dead and emptied. The description of the financial versus real world is getting further and futher apart. No wonder they're all moving to new zealand ..  — Your ship is full of horse shit : \[ [https://theintercept.com/2021/04/20/wall-street-cmbs-dollar-general-ladder-capital/](https://theintercept.com/2021/04/20/wall-street-cmbs-dollar-general-ladder-capital/) \]

chuan_l

The conflict of interest is also quite blatant :  For example david ingss , who is " citadel " global head of operations ..  Still sits on the DTCC board of directors ! Then the " cat nms plan " to consolidate the audit trail has been stuck in limbo since around 2012. When it was a recommendation to fix the last market crash. There is still no way to audit any NYSE trades at all .. Which also means zero accountability for " dark pool " trades ..  There are still massive amounts of illegal " synthetic " shares created. By " citadel " and pretty much all the large banks and hedge funds who now depend on it to turn a profit. Its financial fraud along with their arbitrage. Focused on stealing the silverware , while larger macro economic problems loom ..  Nobody is talking about CMBS either .. Those credit backed mortgage securities are utter junk ..  Its the same situation as 2008 , and will blow up ! Half of new york is now shuttered and businesses are dead and emptied. The description of the financial versus real world is getting further and futher apart. No wonder they're all moving to new zealand .. — Your ship is full of horse shit : \[ [https://wolfstreet.com/2024/12/31/office-cmbs-delinquency-rate-spikes-to-a-record-11-surpassing-the-peak-of-the-financial-crisis/](https://wolfstreet.com/2024/12/31/office-cmbs-delinquency-rate-spikes-to-a-record-11-surpassing-the-peak-of-the-financial-crisis/) \]

chuan_l

The conflict of interest is also quite blatant :  For example david ingss , who is " citadel " global head of operations ..  Still sits on the DTCC board of directors ! Then the " cat nms plan " to consolidate the audit trail has been stuck in limbo since around 2012. When it was a recommendation to fix the last market crash. There is still no way to audit any NYSE trades at all .. Which also means zero accountability for " dark pool " trades ..  There are still massive amounts of illegal " synthetic " shares created. By " citadel " and pretty much all the large banks and hedge funds who now depend on it to turn a profit. Its financial fraud along with their arbitrage. Focused on stealing the silverware , while larger macro economic problems loom ..  — Nobody is talking about CMBS either ! Those credit backed mortgage securities are utter junk ..  Its the same situation as 2008 , and will blow up ! Half of new york is now shuttered and businesses are dead and emptied. The description of the financial versus real world is getting further and futher apart. No wonder they're all moving to new zealand ..

chuan_l

The conflict of interest is also quite blatant :  For example david ingss , who is " citadel " global head of operations ..  Still sits on the DTCC board of directors ! Then the " cat nms plan " to consolidate the audit trail has been stuck in limbo since around 2012. When it was a recommendation to fix the last market crash. There is still no way to audit any NYSE trades at all .. Which also means zero accountability for " dark pool " trades ..  There are still massive amounts of illegal " synthetic " shares created. By " citadel " and pretty much all the large banks and hedge funds who now depend on criminal actions to turn a profit. Its financial fraud along with their arbitrage. Focused on stealing the silverware , while larger macro economic problems loom ..  — Nobody is talking about CMBS either ! Those credit backed mortgage securities are utter junk ..  Its the same situation as 2008 , and will blow up ! Half of new york is now shuttered and businesses are dead and emptied. The description of the financial versus real world is getting further and futher apart. No wonder they're all moving to new zealand ..

chuan_l

The conflict of interest is also quite blatant :  For example david ingss , who is " citadel " global head of operations ..  Still sits on the DTCC board of directors ! Then the " cat nms plan " to consolidate the audit trail has been stuck in limbo since around 2012. When it was a recommendation to fix the last market crash. There is still no way to audit any NYSE trades at all .. Which also means zero accountability for " dark pool " trades ..  There are still massive amounts of illegal " synthetic " shares created. By " citadel " and pretty much all the large banks and hedge funds depend on that to turn a profit. Its financial fraud along with their arbitrage. Focused on stealing the silverware , while larger macro economic problems loom ..  — Nobody is talking about CMBS either ! Those credit backed mortgage securities are utter junk ..  Its the same situation as 2008 , and will blow up ! Half of new york is now shuttered and businesses are dead and emptied. The description of the financial versus real world is getting further and futher apart. No wonder they're all moving to new zealand ..

chuan_l

The conflict of interest is also quite blatant : For example david ingss , who is " citadel " global head of operations .. Still sits on the DTCC board of directors ! Then the " cat nms plan " to consolidate the audit trail has been stuck in limbo since around 2012. When it was a recommendation to fix the last market crash. There is still no way to audit any NYSE trades at all .. Which also means zero accountability for " dark pool " trades .. There are still massive amounts of illegal " synthetic " shares created. By " citadel " and pretty much all the large banks and hedge funds depend on that to turn a profit. Its financial fraud along with their arbitrage. Focused on stealing the silverware , while larger macro economic problems loom .. — Nobody is talking about CMBS either : Those credit - backed mortgage securities are utter junk .. Its the same situation as 2008 , and will blow up ! Half of new york is now shuttered and businesses are dead and emptied. The description of the financial versus real world is getting further and futher apart. No wonder they're all moving to new zealand ..

Spy300

>**BREAKING: US OFFICE LOAN DELINQUENCIES REACH ALL TIME HIGHS** https://cred-iq.com/blog/wp-content/webp-express/webp-images/uploads/2024/12/CRED-iQ-CMBS-Distressed-Rates-by-Property-Type-Nov-1068x1068.png.webp

Spy300

>**BREAKING: US REAL ESTATE DELINQUENCIES SKY ROCKET AS U.S. ECONOMY CRUMBLES AND FED PLAYS STUPID** https://cred-iq.com/blog/wp-content/webp-express/webp-images/uploads/2024/12/CRED-iQ-CMBS-Distressed-Rates-by-Property-Type-Nov-1068x1068.png.webp

Additional-Season335

Existing home sales 14 year low, new construction building dropping for the past year, office CMBS delinquencies at the Great Recession high near 11%, median home prices falling for the past year, credit card and auto loan 90 day delinquencies at 14 year highs, manufacturing jobs decreasing for the past year Do you want me to go on? Because I got more.

Additional-Season335

Starting in January. (I think) Schiller PE Ratio almost at 39 - Sahm rule recently triggered -LEI chart signaling a recession - Inverted Yield curve - historic cyclical low in unemployment (which precedes recessions) back in April 2023 - recessions after rate cuts about 80% of the time - Office CMBS delinquencies at housing crash/Great Recession highs 10.4% - credit card and auto loan 90 day delinquencies at 14 year highs - geo political issues/wars - existing home sales at 14 year lows

Thencewasit

Why do you think the current 2 to 3 million is farm worker visas is not sufficient for the current agricultural production?  What is the correct amount of agricultural workers?  Why do you support having second class people to subsidize giant businesses? You are also woefully ignorant about tomato harvesting.  Harvesting tomatoes is highly mechanized.  By 1970, 99.9% of California's tomato crop was harvested mechanically.   https://www.plantsciences.ucdavis.edu/news/how-mechanical-tomato-harvester-prompted-food-movement If local speculators are able to purchase housing and not use it then why do we have so many multi family foreclosures right now?  We have a 4% delinquency rate on multifamily and almost 8% delinquency on CMBS.  Why are lenders buying back loans out of CMBS to keep the delinquency rate below liquidation rates?

treesRfriends13

Anyone worried about CMBS delinquency rate?? Shits above 10%

Shoopscooper

I did and it was not good. I still have some $10 VLY puts riding until the beginning of 2026, but probably lost about half my money on all my other puts before I pulled out. I do think CRE is gonna to fuck someone at some point, but it's going to be hard to catch that falling knife. "Survive til 2025" was the CRE motto and now 2025 is upon us and rates are still high.  Very recent article regarding the aforementioned and where CMBS are currently sitting: https://wolfstreet.com/2024/11/30/office-cmbs-delinquency-rate-spikes-to-10-4-just-below-worst-of-financial-crisis-cre-meltdown-fastest-2-year-spike-ever/ Pretty interesting this isn't being covered in any mainstream media.

Alec_NonServiam

Lump sum 70/30 VTI/IEF, draw down the IEF over time into VTI if you want to play it safe. I prefer IEF to BND or the like because I like treasuries as a hedge better than corporate paper, MBS, or CMBS.

Every-Shop-3315

# Office Blgd with $92m Loan - Selling for $14m. How do I short its CMBS Tranche? I invest in Commercial Real Estate I think there is money to be made off of this CMBS loan Traunche. Who knows how to short CMBS? Property Details: 750,000 sqft Office, 100% vacant, no line of site to a new tenant. 80% vacancy in the surrounding area. CMBS details: 620,000,000 loan amount, 82 properties. Subject property Allocation: 92,000,000 Making up 14% of the loan amount this CMBS has to be severely discounted and if not, we should short it. How do we make money off of this?

creemeeseason

They didn't go into the lending aspect as that's less of their business. They do talk about valuations of sold properties getting cut. From costar's prospective, they make money on transactions. More sales, even forced sales, are good for business. They offered this as well: "Users of CoStar now have a comprehensive view of global owners with portfolios greater than 25 properties. CoStar will become even more valuable as the resetting of commercial property values begins to kick in '25 and '26. $930 billion of loans are due in '24 with approximately 30% of this total extended from last year. CMBS delinquency rates remain elevated and office delinquencies have increased notably to 7.7%. Simultaneously, I believe that there are green shoots in the office market fundamentals that may motivate buyers looking for opportunistic value. As a result, I believe you will see more transactions on 10x in the year ahead."

robbinhood69

Last time I looked into the CMBS etf it only tracked certain investment grade CMBS and had not thaat much office

Fangslash

personally this isn’t worth the risk because unlike 2008 CMBS crisis is well known for at least 4 years and the market is well adjusted for this, unless you have a good reason to believe the recession will hit before your expiry date that been said this might be a great black swan hedge, thanks for sharing

random-meme422

Dawg, the losses in question relate to RMBS. And CRE properties that back CMBS are primarily class A. Just for context class an offices are still seeing high occupancy and extremely high rents. Not everything is some shitty outdated 1950s office lmao

IceColdPorkSoda

CMBS is a fraction of the RMBS market.

NOT_MartinShkreli

What if I told you that every tourist destination site has an Airbnb bubble where they package up the rental loans into CMBS tranches And those people took out HELOCs to buy homes over list, raising appraisals for nearby homes, then taking out more HELOCs to buy more rental properties … and all of a sudden none of the airbnbs in my area are full and slashing prices in a desperate attempt to get any money

NOT_MartinShkreli

Situation near me is “Airbnb is free money if you’re rich” … and we have an Airbnb bubble with them also now not being filled, people took out HELOCs to buy additional rental properties and packaged that shit up into CMBS tranches to offset failing office space

NOT_MartinShkreli

And to make matters worse, near me they’re packaging up multiple Airbnb properties and condos / apartments into CMBS tranches to offset failing office spaces. The Airbnb owners take out HELOCs to buy more homes over lost, driving up appraisal values … more HELOCs… more Airbnb bought. All of a sudden these places are not being filled and when it collapses it’ll be 2008 on steroids because single owners will lose every home in a cascading domino of leveraged debt

NOT_MartinShkreli

That’s what’s happening around me, except the homes are all Airbnb properties packaged into CMBS tranches to offset failing office spaces

NOT_MartinShkreli

Which is even crazier because near me people are taking out multiple HELOCs on Airbnb properties to bid over list on more of them. Which drives up valuations and more HELOC to take out. Then they package those multi rental units into CMBS tranches because it’s not a mortgage anymore, it’s commercial real estate. They’re running the 2008 playbook on CMBS right now. Airbnb unit numbers and apartment builds are bonkers near me and they are not being filled

NOT_MartinShkreli

And Evernote wild is if you group a bunch of Airbnb properties together and apartment buildings into CMBS tranches. It’s like 2008 again but slightly different tune

NOT_MartinShkreli

That is actually happening when they bundle these rental properties into CMBS tranches because it’s unregulated

RossRiskDabbler

Have we forgotten how CMBS and RMBS (structured real estate) grew like a bubble and blew up the ocean?

LemonTigre1

Oct '07 called, they want their sentence back. [CNN Money Article - 9 Oct '07](https://money.cnn.com/2007/10/09/markets/markets_0500/ ) No history doesn't repeat, but it usually rhymes. So far, on the GFC bingo card we've hit: -Election year -50 bps cut mid-Sep -an over-valued equities market (esp. tech and housing) -extremely over-leveraged HF and banks (derivatives and CMBS) I'm sure I'm missing some, but here are some new ones: -Consistentlyn downward-revised employment data -redefined inflation metrics But you're probably right, **"iT's DiFfErEnT tHiS tImE"**

NOT_MartinShkreli

They basically did not regulate CMBS after 2008 so the greedy banks moved over to CMBS by buying up tons of homes and building “affordable housing units” to rent out and package into CMBS. The failing CMBS properties of work offices is being swapped out for large amounts of short term and long term rental units. If things go to hell, it’ll be 2008 on steroids because they ran back the same play book with way more money at stake

NOT_MartinShkreli

And when the airbnbs continue to not be filled near me it’s going to be catastrophic So many people took out HELOC to buy inflated assets and continued borrowing to buy additional properties. It’s like a CMBS bubble on homes

InternationalSpare28

Yes, private equity (PE) is a bubble. Rehypothecation is a word you should be familiar with--PE firms reuse collateral across multiple loans, sometimes up to 140% of their original value, expanding leverage without increasing underlying assets. When liquidity tightens or asset values drop, multiple creditors claim the same collateral, leading to forced liquidations. The industry’s size-growing from $500 billion to $8 trillion in 20 years-has been driven by financial engineering as you said, debt-financed buyouts (LBOs), and structured financial products akin to mortgage-backed securities (MBS), such as SLABS (Student Loan Asset Backed Securities), CLOs (Collateralized Loan Obligations), and CMBS (Commercial MBS), which all contributed to the 2008 crisis. With shadow banking providing unregulated capital, and central banks managing liquidity in complex ways (50bps cut at ATHs…?), the bubble is increasingly fragile and at risk of unraveling. Liquidity injections will keep it from collapsing for a while, but the FED will have to get increasingly more intrusive to keep assets elevated, such as using Japan’s creation QQE (Qualitative-Quantitative Easing). It’s inevitable that it crashes, but if the FED pull off a soft landing is yet to be seen

redditmodsRrussians

Unless those CMBS comes with a pager/walkie talkie, they aint blowin up shit. Took a whole bunch of readin to get to the gold bug push. You sir truly are the lord of all rainbow bears.

REmonkey13

Office CMBS loans are a problem, but otherwise the sector is performing better than you’d expect

Ziggy-Stardust

It’s based on CMBS data

RossRiskDabbler

Blistering barnicles; this is so dead; this shit with Cedar; it's like acquiring ABACUS and flying upside while instutitional sits short. Lord this will be painful. Cedar REIT focuses on "primary focus on grocery-anchored shopping centers in the Northeast" Every CMBS owner or RMBS owner I know; sees a decline; and higher insurance prices. With banks not willing to lend. This is dead in the water; let alone bid/ask man. But well done on the profit.

Potato_Octopi

CMBS has been an ugly spot for a while. Lower rates will help, but not solve all those problems. That's not really a new thing though.. CRE has been watched pretty closely. I've seen a few articles over the years on CRE on FT's blog Alpahville. [https://www.gspublishing.com/content/research/en/reports/2024/05/16/73962ee6-c108-4e2b-9a04-a55d4af8519f.html](https://www.gspublishing.com/content/research/en/reports/2024/05/16/73962ee6-c108-4e2b-9a04-a55d4af8519f.html) I think the closest thing to a CRE apocalypse would be what we already had hit a couple years ago with the regional banking crisis.

kingjack03

You should look at corporate mortgages and vacancies. Lots of institutions have a good amount of exposure in their bond funds due to CMBS. A good chunk of those mortgages are due in 2026 and vacancies aren’t going down.

Economy-Spray-8197

Playing devil's advocate here, but one could argue that there is something of that nature potentially looming. CMBS market is in an awful spot because of office sector. Lots of office is going vacant as lease terms expire, and keys are being handed back to banks. A large amount of office focused REITs are super cash constrained with no real way out. On top of this, the 10 year almost hit 3.7 today, making it a much better time to try to sell off commercial assets to mitigate losses(Many of these losses will not be realized until that time, as many companies record inflated book values on financials). Banks with high exposure to office backed CMBS could very easily be the first domino.

MathandMarketsCFA

If you want synthetic short CMBS exposure you’d short the public REITs that borrow in CMBS and own the equity - all the CRE CLO guys You as an individual cannot play in cmbs you don’t have enough money to qualify

Special_Chair

Did you get the answer and trade? I’m looking into trading CMBS too

persian_mamba

As someone who works in middle management in CMBS lending at a large bank... a lot of real estate articles people post are flawed and I can refute them but this one is actually pretty spot on. Most people think real estate is full of greedy landlords who wanna make a lot of money and ruin the world, but it's mainly just laziness like this.

goldcoastflow

That doesn’t matter. Locking in your 6mo CD doesn’t affect a bank’s decision to purchase a 7yr CMBS. And banks don’t limit what they lend/buy out of checking accounts. There’s a reason they carry cash on their balance sheets.

GraphNerd

Let's see.. Fed printed how much money through the pandemic? Increased the money supply by what number again? Inflation was supposed to go bananas with the printing but somehow did not? Calculations changed? Again? The average American Consumer is running out of money, has no access to debt (because CC companies are tightening the belt with rising defaults and write offs), and can't afford shit anyway. Job market is a joke in most cities with wages not keeping pace with REAL inflation. Milk is still 36% more expensive than it was in 2020. Doesn't feel like 2% to me boss. Asset valuations right now are still overblown from pandemic era fiscal stimulus. All those zombie companies that were supposed to bust... A lot of them are still around. CMBS is a fucking joke and office lease rollovers into the 7% range are just now starting. The shit show is starting to pile up and get stinky. That's the case. Fuck your puts, buy calls because bears are only right when they are right and we've been in a statistical bull market since 1980 (sans a few revisions to mean).

SayhiStover

I was. I also worked at Bear Stearns in their CMBS group. And I also took my severance and pumped it into Lehman because I thought there was no way the government would let Lehman tank after Bear. Never been more wrong in my life.

deeej-IV

Sure. * Collateralized loan obligations * Commercial Real Estate & CMBS (increasing defaults/adjustable rates/demand shocks) * Inflation/fed rates/stagflation -- inflation not going down, fed likely to increase rates. * Yen debasement * Corporate defaults (highest since 2020) * Federal debt/trillion in interest payments/taxes now not enough/political gridlock/corporate ownership/kleptocracy/greed * Credit card debt * Auto-loan defaults * Bond markets having control of the federal government. * Private equity/alternative investments US treasury bonds overleveraged. * Sinking cost of funding Ukraine's war against Russia. * Real estate gridlock. * *Symptoms of a bubble.* All of these are fundamentally affected by inflation and the fed's monetary policy for lowering inflation. Each of these are all in a dire state as a result of inflation and increasing fed rates and many of them require both to go down which will only happen if economic disaster happens.

OppositeReasonable97

VIX at 13. First AAA CMBS loss. Go figure

LarryStink

This is a direct email from Wolf Richter.  The good thing about the CRE meltdown is that the damage is spread far and wide, globally, via CMBS, REITs, PE firms, hedge funds, CLOs, insurance companies, pension funds, government guarantees (half of multifamily), foreign banks, and US banks. I have extensively written about that multiple times in detail. If the CRE debt were all held by US banks, we would already be in a financial crisis. But US banks hold only a small-ish part of it. All the other stuff is held by investors and beneficiaries globally and they take the hit -- that's the big concept with the CRE meltdown.

layzclassic

While everyone knows about it, I am not sure if they can solve it. Not sure about the US commercial mortgage. In comparison, China seems to be fked, all loans and bonds r fked or frozen. HK developers are selling them off for big losses, partly due to political issues and brain drain. The problem would be the ones who still have to pay back the loans, especially the recent ones. Anyhow, CMBS is already going up, expecting lower interest rate. I'm afraid it's gonna blow up a few years, along with small banks and bonds. Everyone will use it as an excuse to sell all stocks. Yes, I'm a winnie da bear

Ok-Salad9664

I’ve been researching it more, it looks like we need to find whoever is holding a lot of loans for non-owner occupied San Francisco, Austin, or Seattle office properties. I can’t find a way to research who holds the loans cheaply however. There’s a chance the risk has been diversified away in CMBS but I have a gut feeling there’s a regional bank that’s holding a bag in one of those markets.

redditmodsRrussians

I dunno...seems like CMBS is where its at in terms of crisis point. Too many buildings empty and not needed while they keep building more of these giant money tombs thinking somehow its all gonna work out somehow. Its just banks and commercial real estate investors bagholder version of "buying the dip" like retail bagholders on gambling stonks.

dogoodsilence1

Yes it’s foreseeable. You can consider more defaults on [Commercial Backed Mortgages](https://www.fitchratings.com/research/insurance/us-commercial-real-estate-deterioration-to-increase-in-2024-led-by-office-21-12-2023#:~:text=Fitch%20forecasts%20overall%20U.S.%20CMBS,June%202020%2C%20to%203.48%25) coming this summer. We will also see more [SPAC](https://www.ft.com/content/83f0feba-5168-44da-90d7-b0aa11030cf0) bubbles bursting. I’m thinking DJT and the SPAC that just merged with it are going to be the catalyst [Donald Trump](https://fortune.com/2024/01/09/donald-trump-herbert-hoover-wants-economy-crash/amp/) is trying to create with his corporate overlords.

Beautiful_Speech7689

Puts on the 1-year T-bill Equity depends on your timeframe, looking at 1-2 months out, gun to my head I say call. I think you get higher inflation readings over the Summer as transportation increases due to the following: Higher travel inflation entering Summer due to higher seasonal demand, reduced oil production from Russia (lots of this ends up in India/China, has to be replaced somewhere) and potentially Middle East. Also, Boeing/United issues point to a potentially reduced domestic air fleet which will apply upward pressure on airfares. Airspace remains closed over Russia, Suez/Panama canals are both operating at reduced capacity due to water levels or rebel attacks. Housing continues to inflate at a steady rate barring modification, open market operations impacting long-term MBS/CMBS rates. I think this is unlikely. Service and labor will continue to see pressure due to seasonal demand. Global food shortages due to war and climate change remain an issue. Restoration of Ukraine exports helps, but I don't see anything that moves the category below 2% annualized. TLDR: I see these rate cuts being priced back out around June/July.

Beautiful_Speech7689

If they want to attack housing specifically, they'd consider buying MBS and CMBS to bring down while allowing Treasurys to continue rolling off of the balance sheet. The spread between UST and MBS tightens, but who cares if it eases one of your primary inflation factors. It takes some guts to buy again while short-term rates are still elevated, but provides control over at least one of the key factors. It might make some people's heads explode, but there's a first time for everything and we're in uncharted territory.

Legitimate-Look6378

Its not the 117bn debt thats the issue, the question is how over leveraged are the CMBS market and if their are similar tranche bets going on in the background. Enjoy the rabbit hole.

MJinMN

You are overly hyped up about CRE. First, CRE is comprised of a ton of different asset classes, many of which are still doing fine. In a lot of cases, a bank makes a business loan and if they take the borrower’s building as collateral it gets classified as CRE. Non-owner occupied office is the worst, but average bank doesn’t make loans against skyscraper office buildings in Manhattan and the exposures as a percentage of loans is relatively modest. The most aggressive CRE lending was packaged into CMBS, so until you are seeing implosions there, you’re not going to see anything crazy in bank-land. That’s not to say that banks won’t take losses in CRE, as they will, but it will be spread out over the next several years and the loss content will be manageable in most cases - this isn’t the start of another financial crisis.

RichSir1938

Plus 10% of their deposits are escrows from loan servicers (CMBS and RMBS) and lenders, which require the deposit bank to be rated higher than junk. This article explains it: https://www.cnbc.com/2024/03/04/some-nycb-deposits-may-be-at-risk-after-another-moodys-downgrade.html

elefontius

I don't think that will help them long-term with their credit downgrade. Most counterparties require you to maintain an investment grade rating and it's really hard to function as a bank if no counterparties are willing to do business with you. I think BTFP expires on the 11th of this month and even that might just be a short-term fix for NYCB. Right now the bigger risk for them is their counterparty risk - NYCB packaged a lot of their commercial real estate portfolio into commercial real estate backed securities and sold them to counterparties. Those counterparties can now cancel those deals and request money back since NYCB got downgraded. Those CMBS will end up back on NYCB balance sheet and they are going to lose a ton of capital. My bet is those counterparties are working overtime right now to get out of any trades they have with NYCB and it's going to be a quick doom cycle because between this and capital flight from depositors, it's going to be hard for them to retain the capital requirements they need to stay open.

nateccs

this is more residential real estate exposure no? and CMBS doesn't move at all its been flat since december. i already have puts on KRE, NYCB carries 2% weight on it.

_Ghost_Void_

Beautiful work. Just remember that Michael Burry almost went broke because he was two years two early on the trade. And this time around everyone and their mother will be shorting CMBS. Plus these days it seems like the fed will bail out any one who stands to lose money and is already rich so with my luck if I tried to short CMBS the next day Powell would announce the largest purchase of CMBS in human history.

tachyonvelocity

If you want to actually know how overall Commercial real estate is doing instead of all the social media comments and major news media talking about the potential of a CRE collapse, I would look at [this Trepp data](https://www.trepp.com/trepptalk/cmbs-delinquency-rate-inches-up-in-february-driven-by-office). "The overall US CMBS delinquency rate rose to 4.71%, an increase of 5 basis points for the month. (The all-time high on this basis was 10.34% registered in July 2012. The COVID-19 high was 10.32% in June 2020.)" Office isn't doing well, I realize that, but a CRE crash leading to a banking crash, isn't going to happen unless Multifamily CRE delinquencies are going up. They aren't really going up, in fact they're pretty much the same as last year, obviously because both shelter rent inflation and employment have been high, people still have the ability to pay higher rents because real wages have risen.

confused_trout

Thank you so much what if I want to short CMBS? What would the vehicle

ajohns90

Vanguard is (still) projecting better growth in REITs over the long term than large caps. However, I think it’s more than just looking out for lower refinance rates. I do think at this point it’s a long term bet but after 4-6 years when the toxic components of CRE are burned off, and when banks, CMBS, etc are more highly regarded again, then REITs will rise to beat their average returns over the past few years.

Life-Industry-1131

Moodys says 80% of CMBS loans at risk of default/ workout But ya for sure AI AI AI look this way don’t look at that AI AI AI

Ngc2273

Didn't mean to imply the stock market is zero sum. However the question still remains in my mind, if there's a net of trillions still flowing in the stock market, where is it coming out of? It's a lot of money for some small cap failing companies to equal the balance. Is it big international money coming in, is it sidelined under the mattress money, or just more printing? If residential and commercial real estate is doing badly, which it would be in high interest and low occupancy environment post covid, then the big insurance and pension funds dealing with RMBS and CMBS should be fuked from both sides and crying losses no? Either they are hedged extremely well, will start failing at some point, or they've been bailed out already. Only the last situation lifts the markets. And to your last point, if that's the case inflation will remain high and if the fed is really about their word, interest rates will then remain high as well. The stock markets were high on pricing in cuts starting from March, atleast now we know that won't happen and the Markets went even more ripping. Anyhow I went long on some stuff now so can't complain. Just trying to make sense of it but can't lol.

imcamccoy

What are the chances of a liquidity trap caused by CMBS deterioration?

Puzzled-Raspberry-32

Is there a source for the $1.2 trillion? Any idea how large the total CMBS market is?

Miadas20

Liquidity from reverse repo getting drained. Well all have to find a chair when the music stops in March. Then everyone buys the dip Then '25 melts faces well after the fed had to cut and print this year from CMBS shit show coupled with Bitcoin Ath'ing 12 months after the halving. Yah it only goes up.

realmichaelklemme

Regional bank ETF: IAT Commercial mortgage back security ETF: CMBS do with this information as you will 

Sorry-Business-1152

A big part of their business is in CMBS

machyume

Economy is actually fine, but is everyone going to be fine? No. People's savings are melting, or melted. They will become future needs that the economy will have to support. But that is a later problem. More immediately, people will be forced to make hard choices, and they will have to adjust their way of life. This is as predicted. The rural areas either have to bootstrap themselves or further collapse into urban areas. Urban areas will also have to collapse into commune style living. Late-stage urban living has a model already, see Japan. Prices are expensive there too, but people will survive. Now about the "health" of the markets. First, value is whatever people value things to be, so PE is a useless metric if compared to absolutes. Relatively one another within their groups PE can be "useful". So let's throw the idea of valuation to the side for a bit. What are "surprised" that are coming down the line? Well, there's the elections, and CMBS time bombs. Lame duck will make for an unstable policy period, and commercial real estate is about to get a dramatic update (already happening). Right after tax month, all those new rate contracts will spike expire and commercial office space will have nowhere to go. So the pain of that and the raised interest rates will have to be divide up by all the layers, including the banks. Since businesses cannot move very fast, they will cut workers, and take a delayed hit on some of their top and bottom line due to labor disruption and increasing costs. Will take at least 1 quarter to absorb the impact. This would be the perfect reason to trigger the rate reduction, but timing here is going to be clutch. It will wobble a bit as each news get realized at different points of time. Rate changes are not nothing. So Powell has some options, if he wants to cut earlier to make the lower rate available or cut late to let some of the market take the pressure. Different choices cause different outcomes. The markets will be inefficient during this time as it has to reevaluate all these priorities. I expect volatility to increase. But it depends. If people grab puts right now for half a year it could prevent some of these outcomes, because the puts will act as insurance against if, but bears are going extinct. People would rather sit on cash. If people don't buy puts now, then MMs cannot sell any, and when an even does pop up, it'll absolutely cause a correction. Everyone here has choices. We define the future. By typing this out, I know that I am reducing my potential payout, but I also don't want a massive correction. I have a good system going now and I'd rather the market eases into soft landing so that I can continue to pick up nickels without getting crushed by the bulldozer.

ShittyPianist

I have been researching something to this effect for months. I have no training in finance - so take all this with a grain of salt, I merely worked at a financial advisor place for five years as a programmer until last year. Imo, your best bet is to honestly be in a position where you have a paid off house (or the liquidity to pay off a fixed rate mortgage asap) and no debts outstanding. Also, develop a marketable skill set. The dollar can't fall overnight imo. It would be death by a thousand cuts. The regulation created after the Great Depression that stopped commercial banks from doing investment banking activities got heavily rolled back in the 60s and then pretty much completely thrown out in the 90s. That is what led to the crisis in 2008. There have been regulations reintroduced since, but commercial banks can still do investment bank stuff. This has led to a "too big to fail" rush in the financial sector, imo. If a bank can become large enough that if it were to fall, the Fed bank steps in and will bail them out. We saw this last year with SVB and the creation of the BTFP. The BTFP was more easily utilized by larger banks, and I am very suspect that an arbitrage strat was used to let it be used as aoney printer for the largest banks. The US has gotten away with this for so long in part since we hold the predominant currency of trade via the IMF and since the US can simply sell its debt to other countries in the form of bonds. However, our bonds, both corporate and government have become less appealing, thanks to both political and economic reasons. Also thanks to politics and the neverending threat of shutdowns, Moody's downgraded the US credit. So it costs the government more to borrow money from other countries. So now the world is in a very weird spot. Many countries are holding onto US debt. Many countries' currencies are pegged to the US dollar. The US's spending is out of control. If US banks are sitting on millions of unrealized losses due to basis rate changes in a short time frame, I suspect the same goes for countries. The pandemic hit all countries hard, so less countries have the money to buy the current bonds. To further throw gasoline on this shit show, US CRE pre-pandemic was seen as a really safe investment. With 2019 CMBS coming due this year, the cracks of no one being in the office anymore are starting to show via NYCB and Aozora. Something happened with CMBS things and downgrades last week as well, tho I have a lot more reading to fully grok what. And the BTFP ends in March, whilst also, the gov needs to decide on a budget. I write all of this to say that there is no good answer and that it is unlikely that the dollar will fall far very rapidly. But we are definitely starting to test the bounds of the current system and the ride will be bumpy. So the less people (banks, really) who can lay a claim to your property and livelihood, the better.

ShittyPianist

American commercial real estate and CMBS are going to fuck banks right up the ass worldwide. It's already showing. NYCB and Aozora. Keeping my eyes on life insurance companies for the foreseeable future...