How CalSTRS Plans to Avoid Selling CRE Assets in a Down Market

Commercial real estate valuations have been hit over the last 18 months. Inflation, the Federal Reserve’s response of interest rates hikes, growing operating expenses, previously swollen values, and a lack of transactions undermining price discovery have all done their part to down prices.

That puts investors into a barrel of pickle brine. They may be holding CRE assets that have plummeted in value while refinancing options are tighter, demanding higher interest rates and lower LTV ratios. Selling in a down market could lead to fire sale prices when markets might eventually recover, especially if the Fed cuts interest rates.