Posted In:

Canada, Payments, Lending

Office-ially in Trouble


May 04, 2024


Sarah Parsons Wolter

Posted In:

Canada, Payments, Lending


May 04, 2024


Sarah Parsons Wolter


More than $38b of US office buildings are facing default, foreclosure or other forms of distress, the highest level since 2012 (post 2008 financial crisis), as the Wall Street Journal reports. In the next 12 months, $18b of office loans backed securities will mature and Moody’s expects 73% of these loans to be difficult to refinance.

A combination of sustained high interest rates and employee work from home post COVID has punished commercial real estate owners, who typically finance at least half of a building’s purchase. The US economy’s lack of progress on inflation, leading to expectations for continued high interest rates, hasn’t helped. Additionally, the US office vacancy rate is nearing a new record as businesses have continued to allow employees to work remotely post the pandemic.

Commercial real estate’s troubles have widespread implications for many players, including US banks and other lenders with exposure to the sector. Regional banks have been reporting high net charge-offs, including Republic First Bank who was recently seized by the FDIC and subsequently acquired by Fulton Financial.

Office tenants are getting good deals today as landlords look to sign leases, increase customer retention and help employers bring employees back to the office. According to researchers at NYU and Columbia, the value of New York office buildings could fall nearly $50b in the coming years. Time for landlords to break out that new sauna and cold plunge pool on the rooftop…

work from home

Portfolio News

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Office-ially in Trouble

Office-loan defaults near historic levels with billions on the line - More than $38b of U.S. office buildings are threatened by defaults, foreclosures or other forms of distress, according to data firm MSCI. That is the highest amount since the fourth quarter of 2012 in the aftermath of the 2008-2009 financial crisis. Read more

Office vacancy rate nears 20% to set fresh record, Moody’s says - Tenants continue to downsize with the hybrid work model showing more staying power, battering the office sector. The Federal Reserve’s interest rate hiking cycle has also wounded commercial real estate. Read more

Banks’ ‘broken’ model ramps up property challenges, lender says - The Federal Reserve’s interest rate hikes have crimped transactions and pressured landlords — particularly owners of office buildings that were already hit by the rise of remote work. As costs mounted, property valuations tumbled, pushing some investors to walk away from certain buildings instead of continuing to throw good money after bad. Read more

Industry News

US consumer finance watchdog raises alarm over credit card megadeals - Rohit Chopra, director of the Consumer Financial Protection Bureau, warned about the effects of large deals on competition and financial stability. His own agency has also been sharpening its focus on segments of the credit card industry including subprime, cashback and third-party rewards. Read more

Banks pay savers more as ‘higher-for-longer’ rates hit interest income - Deposit costs at the largest US banks rose more than interest revenue last quarter for the first time since the Federal Reserve began raising rates two years ago, as savers demanded lenders share the benefits. Read more

SBA's push to revive an old idea - The Small Business Administration is once again seeking approval for a plan that would allow it to make loans. But the proposal has gained "near unified condemnation from congressional Republicans" and financial services trade groups. Read more

GM in talks to move credit-card business from Goldman to Barclays - In what would be a big step in the Wall Street bank’s retreat from consumer lending, Barclays is the leading candidate to take over issuance of the credit cards, which have about $2b of balances outstanding, and could strike a deal with GM by this summer. Read more

Complaints of fraud targeting older Americans rose 14% in 2023 - Associated losses with these complaints rose by 11% according to the FBI’s Internet Crime Complaint Center (IC3). Individuals 60 years and older reported 101,068 of these scams in 2023 and lost $3.4b to fraud, with the average victim losing $33,915. Read more

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Chubb to make $350m payout in Baltimore bridge collapse - The insurer is expected to authorize a full payment in the coming weeks, yet Chubb’s exposure to the loss is significantly less than the headline total, in part because it sold some of the risk to reinsurers. Read more

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Select Financings

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Hinkal - San Francisco based privacy layer for confidential decentralized finance transactions raised $1.4m in Seed funding led by Salt Fund. Read more

Moso - Los Angeles based shop-to-earn crypto rewards company raised $2m in Seed funding led by Symbolic Capital and Dao5. Read more

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Securitize - San Francisco based blockchain securitization company raised $47m in growth funding led by BlackRock. Read more

Swap - London based cross-border shipping and return management startup raised $9m in Series A funding led by QED Investors. Read more

X10 - London based crypto exchange for professional traders raised $6.5m in Seed funding led by Tioga Capital. Read more


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