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June 13, 2023

US Banks Facing $1,450,000,000,000 in Commercial Real Estate Exposure As Lenders Prepare to Sell at a Loss: Report

By Alex Richardson

American banks are preparing to sell portions of their commercial real estate debt at a loss, according to a new report.

Although most debtors are up to date on payments, banks are looking to clean up their books as Q2 comes to a close, reports the Financial Times.


Chad Littell, an analyst at the commercial real estate-focused research firm CoStar says,

“The fact that banks want to sell loans is coming up in a lot of conversations… I am hearing more about it than any time in the past decade.”

PacWest Bancorp has already begun selling off big chunks of its construction loan portfolio at a loss.

And before 2025 comes to a close, more than $1.45 trillion in commercial real estate mortgages will have to be renegotiated.


People “familiar with the matter” tell FT that HSBC USA is in the midst of selling hundreds of millions of dollars in commercial real estate loans, potentially at a 5% loss, in order to “wind down” its direct lending to American property developers.

A huge jump in the number of people working from home and ditching the office is at the heart of the commercial property problem.

And real estate billionaire Jeff Greene says the Fed’s interest rate hikes and the ensuing shift towards more expensive capital could rock unprepared and inexperienced investors.

“I see people all the time who are panicked because they’re thinking, how am I going to pay off my construction loan when the apartment building I’m building is done, when rates have now gone up way beyond what I can afford and rents are dropping?

And so I think you’re going to have not just office buildings, people aren’t going to be able to afford to pay off their home loans that are due or their apartment building loans.”


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