Defaults in commercial real-estate debt market trigger losses in SASB bonds
- Defaults in the commercial real-estate debt market are increasing, causing concerns about the future of offices and malls in the U.S.
- Single-asset, single-borrower bonds, known as SASB bonds, are experiencing a high rate of default
- Many of these bonds were initially given triple-A ratings, but the pandemic and rising interest rates have led to losses for investors
- More triple-A bonds are expected to face losses in the future
- The commercial real-estate market is facing challenges due to online shopping, remote work, and the lack of tenant demand
The commercial real-estate market is facing a meltdown, with defaults increasing and causing concerns about the future of offices and malls in the U.S. One area of particular concern is the single-asset, single-borrower bonds (SASB bonds) market, which is experiencing a high rate of default. These bonds were initially considered ultrasafe and were given triple-A ratings, but the pandemic and rising interest rates have led to losses for investors. The market is expected to face more turbulence as additional triple-A bonds face losses. The challenges in the commercial real-estate market are a result of factors such as the rise of online shopping, the shift to remote work, and the lack of tenant demand. Investors are now questioning the methodology behind the ratings assigned to these bonds. Despite the challenges, some office markets have shown signs of recovery, and there are opportunities for bargain-hunting fund managers to invest in properties that may be sold off at higher prices or have the potential to return to profitability.·
Factuality Level: 3
Factuality Justification: The article provides detailed information about the commercial real-estate meltdown and its impact on the bond market. It includes specific examples, data, and expert opinions. However, the article lacks a balanced perspective and focuses heavily on the negative aspects without discussing potential solutions or positive developments in the market.·
Noise Level: 3
Noise Justification: The article provides a detailed analysis of the commercial real-estate meltdown spilling over into the bond market, highlighting defaults, impacts on investors, and the underlying causes. It explores the failures in credit-rating models, consequences for landlords and investors, and potential future turbulence. The article includes specific examples, data on defaults, and insights from industry experts. It offers a mix of information on the current situation and potential strategies for investors, making it relevant and informative.·
Public Companies: Blackstone (N/A), Deutsche Bank (N/A), L Brands (N/A), Macerich (N/A), MetLife (N/A), Park Hotels & Resorts (N/A)
Private Companies: Starwood Capital,Pyramid Mall,Westfield,Shidler Group,Fulcrum Hospitality,PIMCO,Banyan Street Capital,Ashford Hospitality Trust
Key People: Ed Reardon (Managing Director of Securitized Research at Deutsche Bank), Lea Overby (Head of Commercial Mortgage-Backed Securities Research at Barclays), Peter Grant (Contributor to the article), Liza Crawford (Co-Head of Global Securitized Product at TCW)
Financial Relevance: Yes
Financial Markets Impacted: The bond market and commercial real estate market are impacted by the defaults in single-asset, single-borrower bonds. This could lead to further turbulence in the market and affect the ability of landlords to refinance maturing mortgages.
Financial Rating Justification: The article discusses the mounting defaults in single-asset, single-borrower bonds and the impact on the bond market and commercial real estate market. It highlights the risks faced by investors and the potential consequences for banks and insurers. The information provided demonstrates the relevance of the article to financial topics and the potential impact on financial markets and companies.·
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Extreme Rating Justification: ·
www.wsj.com 
