We usually write about positive things and where we can make money but I want our readers to be aware of what’s happening in the commercial real estate market that might throw some cold water into this bull market we are having or recovery, whichever you prefer.
Before I explain what’s happening, just look at some of these headlines.
Work-from-home culture ever since the pandemic. Not too many people are going into the office so restaurants, gyms or whatever is nearby to support these office buildings moved out/closed. So is the rental income from these properties. Even Elon’s Twitter hasn’t paid rent. And I am sure you have seen flurries of news about retailers closing stores in major cities for safety reasons. Walmart, Macy’s, Best Buy, Target, Walgreens, Whole Foods, Nordstrom, Starbucks, CVS and the list goes on and on. And to make things worse, Bed Bath & Beyond, Tuesday Morning (or whatever that store is called) are shutting down.
It’s not just office buildings and strip malls. Even hotels are seeing defaults as well. Hilton Hotel in SF has defaulted. Four more hotels in East Bay defaulted. Some think it might be isolated to the Bay area but NY just saw one of its hotels default as well. Atlanta. DC. San Antonio. Houston.
Who are most likely to be exposed?
Banks. And REIT’s. So what are we doing? We are locking in our profits and holding onto cash. At least 50% cash. Sold our stakes in $FAS $KRE $DPST $XLF (yes, all banks and financial institutions) and decided to wait. You might want to do DD and decide for yourself if liquidating banking stocks is the right move. We think so but again, do your DD.