The Commercial Academy J. Scott Scheel discusses the massive defaults that will hit the commercial real estate industry.
J. SCOTT SCHEEL: “The good news is, is that there’s opportunities for these things to turn around for investors. But the bad news is that through the Troubled Asset Deferral Program, which is part of the CARES Act, nobody has reported on these for 18 months. We have 18 months of defaults that are all going to start hitting now. That happened, that program terminated as of January 1, 2022, and they’ve got 60 days to report it. So by the second quarter of this year, those things are going to start to come out and banks are going to have to deal with that. So that’s going to be a huge crisis in and of itself. And then obviously, we know that the banks, when they start to take on defaulted assets, they’re not really in a position to make loans. And so, so many of those assets that did stabilize but have now been hurt are going to be hamstrung by their balance sheets because 3 years of historic operating statements won’t really be there to support new debt with values plummeting. There’s going to be a lot of blood in the streets and a lot of folks who are going to be looking for safe haven.”
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