The CMBS Crisis Just Became a Little Bit More Serious

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The Bubblevisions and Mainstream media are on a winning streak with their ignorance of the real news once again.

Just like 2006 and 2007.

In their defense it is easier to proclaim that everything is awesome and life shall move on without any serious consequences even though real inflation is not tame and long term inflation might just begin a massive resurgence in Q3 and Q4 of this year.

The initial reports of bankruptcies this year to date provides a strong indication that all is not well as per this article from Reuters:

Bankruptcy filings surge in first half of 2023 in US – Epiq

Excerpt:

A total of 2,973 commercial Chapter 11 bankruptcies were filed in the first six months of 2023, Epiq said, compared to 1,766 in the same period last year.

Additionally, individual Chapter 13 filings also saw a 23% jump during the same time-period.

Bankruptcy filings for small business, categorized as Subchapter V elections within Chapter 11, jumped 55%, according to the data.

I have added emphasis to this excerpt because the news is not good regarding small business and bankruptcies and only appears to be worsening in the future as the Fed has to press interest rates higher, causing the cost of borrowing to accelerate for small to medium sized businesses.

This of course impacts Commercial Mortgage Backed Securities as companies began to fail, default on their leases and shut down. This story from June 1, 2023 via Trepp should provide a strong hint as what is to come:

CMBS Delinquency Rate Shoots Up in May 2023 – Biggest Jump Since June 2020: Overall Rate Hits 14-Month High

Excerpt:

In May 2023, the overall Trepp CMBS delinquency rate shot up 53 basis points to 3.62%. The rate is the highest level since March 2022. The 53 basis point increase is the largest since June 2020 when delinquencies surged more than 3%. The increase in May 2023 was driven by a huge spike in office delinquencies. The office rate jumped 125 basis points to 4.02%. The last time the office rate was above 4% was 2018. At that time, many loans originated in 2006 and 2007 were still outstanding accounting for the high level. That is not the case currently.
(Emphasis JGFLA)

This chart from the article indicates the new alarming trend:

Then on a holiday, of all times, YahooFinance breaks this story:

Blackstone REIT Announces Major Asset Liquidations As Redemption Requests Continue

Two key excerpts tell the tale of just how bad things are getting:

Blackstone real estate investment trust (BREIT), which recently made news for exercising a clause that restricted owner withdrawals for several consecutive months, has not taken the news lying down. The real estate investment trust (REIT) is still trying to raise money for its shareholders and recently announced the sale of $3.1 billion worth of its commercial portfolio. It also is rumored to be considering a sale of its Las Vegas portfolio.
(Emphasis JGFLA)

If they are at the point of liquidating their most profitable portfolio as highlighted above, things are far worse than anyone in the financial media is letting on. And to drop this story on a holiday, that is a hint that the situation is far worse than the Bubblevisions are letting on. More here:

It’s no secret that Blackstone has been restricting owner withdrawals for almost the entire year. With that in mind, it’s not hard to imagine it is under tremendous pressure to liquidate assets. That’s why the Prologis deal may not be the last one it pulls off this quarter. Rumors are circulating that Blackstone may sell half of the $4.25 billion interest it acquired in the Bellagio Resort & Casino in Las Vegas in 2019.

In other words, a giant storm has formed and most of America’s financial world has dismissed this because Jay Powell has said “never again” even though he is clueless as to how bad his policies have allowed this to become.

Stay tuned because a recession would be the death knell, which is almost always followed by a collapse in residential securities and a surge of foreclosures as the banksters have issued government backed garbage mortgages once again to keep the illusion that all is well in America’s debt death cycle economy.