WHY is the Commercial Real Estate Market NOT Crashing?!

WHY is the Commercial Real Estate Market NOT Crashing?!   

In this mini-episode of The Gould Mine, I'm diving into the unexpected calm before the storm in the hotel and commercial real estate sectors. Just months ago, predictions of a major fallout from debt maturities had us bracing for a deluge of distressed properties—but the market's current state is more of a soft landing than a crash. Join me as I explore why the anticipated wave of deals hasn't fully materialized, and why now might still be the right time to find valuable investments, even if the market hasn’t hit rock bottom yet. Welcome to The Gould Mine....

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Transcript

•  What's up gold miners I was recently having a conversation with a fellow investor and we were almost at a loss for what is happening right now with the current environment. We heard 9 months ago 12 months ago hey the winter is coming. Winter is coming a quarter of a trillion dollars. Worth of debt is coming due in the hotel sector and God knows how many uh trillions of dollars uh in in overall commercial debt is coming due in the next 12 24 months and we kept hearing that there was going to be this massive wave of distressed properties Etc. And we both just kind of had this like Epiphany or moment of like it hasn't really happened yet has it or it has. But it's a lot more subdued than we initially anticipated. It's almost like a soft Landing so to speak and what's interesting is that even though we were anticipating all of these like amazing crazy deals coming up and they haven't necessarily come up sure there's been. Some really good deals come up but not that the amount of good deals that we all thought were going to come up and so there's just a couple things that came to my mind as we were having that conversation that I think is worth keeping in mind. You know a lot of times we're in a situation where we think something's going to happen in x amount of time. But really we don't see the full Fallout of those events for much longer and so we might not see the true Fallout from all of this for another 12 24 36 months and so I think it's important for us to stay vigilant.
•  Just because the Fallout hasn't necessarily fully come to fruition.
•  We haven't fully realized or seen the Fallout from the loan maturities that have already happened and the the low maturities that are going to come due in the next 12 months or so I think that we should all just stay patiently waiting. Now you know the truth is this that anyone that took a loan out in the last five to seven years and the loans maturing in the next 12. There is no path to refinancing into a debt product that is going to be less than what they initially got before maybe like a lower rate than what they got before and so any way you slice it. They're going to have to refinance or or or move into a product that's more expensive.
•  The question is how much more expensive because even if rates come down a full point or a point and a half between now and and the end of this year very unlikely by the way. But let's just say they do we're still looking at like a two to 2 and 1/2 point spread on what they initially got and so a lot of commercial assets were bought under the assumption that those rates were going to last for a lifetime and so a lot of those individuals still will not be able to hold on to those properties for the Long Haul and so I would just encourage everyone to remain patient.
•  Although it was just one of those things where we like wasn't. The sea supposed to be bloody already like why is the sea still like blue. It's just all sunshines and rainbows and and so this is something that was just on my mind. I wanted to talk about and really just put out there that even though we haven't really seen the waters get super super bloody.
•  I wouldn't rule that out altogether.
•  At this point I would say it's still very much possibility but also keep in mind that the deals that are coming up right now that look good right now will look even better in 2 years from now so. I'm still of the opinion that even though things could get worse I would not wait for the market to bottom out for you to start making deals. Happen I still I'm seeing plenty of really good deals right now and we're definitely trying to make those happen because you won't know you're at the bottom until it's too late cuz.
•  What I've told all my clients for forever and the the principle that I live by is that you only know that you've reached the bottom once you're on your way back up right and so right now. I still see us kind of slowing down coming down even more and more and so hey as we ride that wave all the way to the bottom. As we ride the ride. All the way to the bottom make sure that you're picking up as many assets as you can because again once you know oh shoot we've bottomed out. You're already on your way back up and and at that point you're multiple offers all that. So this St in Gold everyone hope you found this little gold nugget useful keep mining everybody.