Search
 
Commentary

The Cycle Has Turned

As debt markets falter and values are declining

joel-ross

It should be readily apparent by now that the cycle has turned and the big party is over. It is not that we are going to have any sort of crash, but it is time for a reset for the same reason as it always is, the capital markets are volatile, CMBS is shut down and the low cost of capital easy money is now no money or very expensive money. For the past 6 years we have had super accommodative monetary policy from the Fed which inflated asset values by creating a fictitious low borrowing rate. CMBS returned to accommodate aggressive lending and the mezz market was reactivated to push leverage up to the same irresponsible high levels from before 2008. Now the candy has been taken from the baby and the crying has begun. Borrowers are suddenly stuck with maturing debt and nowhere to turn other than gap equity or hard money lenders. With the $175 billion of maturing loans, and no CMBS market, there will inevitably be defaults, loss of control to gap equity providers, or very high cost loans which could default if the economy falters.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Joel Ross

Joel Ross

Joel Ross began his career in Wall St as an investment banker in 1965, handling corporate advisory matters for a variety of clients. During the seventies he was CEO of North American operations for a UK based conglomerate, and sat on the parent company board. In 1981, he began his own firm handling leveraged buyouts, investment banking and real estate financing. In 1984 Ross began providing investment banking services and arranging financing for real estate transactions with his own firm, Ross Properties, Inc. In 1993 Ross and a partner, Lexington Mortgage, created the first Wall St hotel CMBS program in conjunction with Nomura. They went on to develop a similar CMBS program for another major Wall St investment bank and for five leading hotel companies. Lexington, in partnership with Mr. Ross established a hotel mortgage bank table funded by an investment bank, and making all CMBS hotel loans on their behalf. In 1999 he formed Citadel Realty Advisors as a successor to Ross Properties Corp., focusing on real estate investment banking in the US, UK and Paris. He has closed over $3.0 billion of financings for office, hotel, retail, land and multifamily projects. Ross is also a founder of Market Street Investors, a brownfield land development company, and has been involved in the acquisition of notes on defaulted loans and various REO assets in conjunction with several major investors. Ross was an adjunct professor in the graduate program at the NYU Hotel School. He is a member of Urban Land Institute and was a member of the leadership of his ULI council. In 1999, he conceived and co-authored with PricewaterhouseCoopers, the Hotel Mortgage Performance Report, a major study of hotel mortgage default rates.

More from this author

Recommended Stories

CRE’s Emerging Drug Problem

CRE’s Emerging Drug Problem

Anthony J. LoPinto |

Amazon’s long-rumored entrée into the prescription business recently became a reality. It’s clear that the real estate industry will soon find itself with a major drug problem.

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2024 ALM Global, LLC. All Rights Reserved.