L.A.’s financial district, once the thriving heart of downtown, struggles to bounce back from pandemic shutdown and homeless crisis. Experts say it needs more housing, fewer offices.“They’re going to have every incentive to hand back the keys to lenders,” David Bitner, global head of research at Newmark, said in an interview. “I’m shocked that hasn’t happened a lot more.”
Newmark defines “potentially troubled” as properties where debt represents at least 80% of the real estate’s marked-to-market value, based on price indexes including Green Street’s., carry the biggest share of at-risk debt, with $303 billion of potentially troubled loans maturing through 2025, according to Newmark.
After offices, apartment buildings are the next-biggest category of potentially troubled properties, with $192 billion in debt needing to be refinanced through 2025, Newmark estimates. Landlords who try to hang on and weather the storm are likely to take a bigger hit than those who cut their losses more quickly, Bitner said.
“There’s going to be a reckoning,” he said, “and everybody that waited to deal with the problem is going to regret they did.”