Large Bank Supervision Forum 2023

CRE Values – CPPI (All Property & MF down 13%-20%) Values Falling & Remote-Work to Stay; Hotel the Surprise down only 5% (Bu-Leisure)

The Key CRE Value Question for 2H 2022: What is the CRE Value impact if Expenses rise more than rents/revenue?

Why Lodging has so much less decline? “Bu ‐ Leisure”

Are lenders, Investors and Appraisers ready for this Value Disruption in 2023?

https://gs-s3-prd-usw2-website.s3.us-west-2.amazonaws.com/uploads/2023/01/06075156/GSCPPI20230106.pdf

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Interest Rate Change on CRE Values Band of Investment to Derive Cap Rate – This is what is ahead (A 25% decline)

On January 20th, 2021, the 10-Year Treasury Yield was 1.10%, and with spreads hovering around 225 BPS, the rate on a CRE loan was around 3.35%. Leverage was easily attainable at 75%. If you bought right, you could get a 240 BPS spread to your Equity Dividend Rate - 5.75%. On Friday, October 21st, 2022, that 10 Year Treasury index increased to 4.21%, which always portends a commensurate spread increase (let's assume 275 BPS), rendering an interest rate of 6.96% (probably light in today's market). This spreadsheet shows the effect this has over an estimated NOI and given a two-year (roughly) time period. Bottom line? A 24.61% value diminution. Perhaps now would be a good time to buckle in.

Gregory Laskody, CCIM (greg@hautecre.com)

KC Twist: Now layer in that NOI went down due to Expenses growing faster than Rents

and the Impact on Value is down an additional 15% for a total decline of 40%. https://www.linkedin.com/posts/greglaskodyccim_some-fun-with-cap-rates-on-january-20th-activity-6990179378861088768-cggy/?utm_source=share&utm_medium=member_android

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