Huge Jump In Negative Leverage For CMBS Loans Bodes Ill For Property Values

This year’s rapid interest rate hikes, combined with cap rate movements, put the squeeze on commercial real estate, with about $5.5B, or 28% of new CMBS issuance, suffering from negative leverage during the third quarter of 2022, according to a report by Moody’s Analytics.

For those deals, the cost of debt exceeds projected returns on investment.

The amount of CMBS exhibiting negative leverage was only 8% in the second quarter of this year, Moody’s noted. During Q3 2021, the total was a mere 2%.

The third-quarter jump was seen across asset classes, but industrial and multifamily have the largest share

Read more