Investors pile into risky commercial real estate debt, even as Fed warns of trouble
February 27, 2021 | Joy Wiltermuth | Market Watch
It takes a fortune to shape a city’s skyline.
But it also frequently takes borrowed money from Wall Street, the kind of debt that can be tied to a lone billion-dollar skyscraper, or a couple dozen buildings, that ends up spun into bonds and sold to investors looking for a return.
One of Wall Street’s hottest “reopening” trades has been playing out in the $600 billion commercial mortgage-backed securities (CMBS) market, through bets on risky slices of property debt that could end up with big losses, or rewards, if hotels fill back up with business travelers, workers return to the office and shoppers wander back to shops as the COVID-19 threat subsides.
