It’s not just commercial real estate, apartment buildings are getting hit as well

Yeah, it’s not just commercial real estate anymore. Apartment buildings, residential. Apartment buildings are gonna start taking a hit too. You got over a trillion dollars coming due in loans over the next couple of years here. Now, apartment buildings, oh, it’s super safe. Real estate haven. Yeah, investors have bid up the price of multi. family buildings for years. Again, why? Well, we can keep raising rents. Just keep raising rents. We can get outsized returns. We can take on all of this debt. And guess what? This debt that we take out, we can pay it down if we keep raising rents. Yeah. Guess what? Their borrowing costs have gone up, obviously, because interest rates have risen. This debt costs have hurt many of these companies out there that have these multifamily units. Apartment building values fell 14% for the year ended in June after rising 25% the previous year. Okay, the delinquencies in multifamily are low, but they’re starting to rise. Okay, starting to rise. That’s going to continue. Rent growth is slowing and business expenses are rising. Again, I look at this and I have, actually I smile, I do. I hope that they default. I hope that these landlords, I hope that they default, I do. I’m not a big real estate guy. I’m not. I understand the importance of it and having it in part of your portfolio. What I mean, I’m not a real estate guy. I’m not one of these financial engineer real estate guys where I’m trying to tinker around with numbers where I’m borrowing against the building and saying to myself, you know what, I got to whack my tenants over the head by raising rents to ridiculous levels, so I’m crushing them in order for my business model to work. That, I’m sorry. That’s the business of you being an a-hole, in my opinion. Okay, hey, to each his own. Okay, to each his own. I just didn’t have that ethical bypass at birth, I guess. Some of the stories and how they go about doing this. It really is. Apartment building owners borrowed more than 80% of the building value from bond markets. Most apartment loans are fixed rate long-term mortgages. investors took out more shorter term floating rate loans during the pandemic. But what did they do? They raised rents aggressively, betting that they could sell the buildings or refinance their debt at much higher valuations once their buildings generated higher rental income. But they didn’t think that interest rates were going to rise so quickly, pushing down the values of their buildings and forcing them to refinance at higher rates. Again, that’s your business model, is whacking your tenants over the head. Okay, I hope you guys default. I do, there’s this company, Tide Equities. It acquired 6.5 billion in rental property since 2016, mostly lower and middle income apartment buildings in the Southwest. The company expected to push up rents 44% over the course of 3 years. 44%. Oh, and this past June, they said, oh, our strategy isn’t working, and renters are becoming too tight on cash, and we’re not getting enough money, and you’re going to have to put more money in. Good. I hope you lose. I hope you go under the building’s not going anywhere. Lender take it over. Someone will buy it at a discount. I hope you lose. Thanks for watching. One story after, no, and again, real estate financial engineering. Again, I don’t understand how it works. I even don’t understand how lenders, especially when you get these big real estate companies where they’re able to default on one building, but they can’t, I mean, they’re not going after their other assets. I don’t know even how they structure deals like this, how these big players get deals like this. It’s patently absurd. But again, if your business model is screwing your customers, Well good, I hope you fail. Watchdogonwallstreth.com.