When a company like Starwood Property is in trouble, you don’t have to panic, but they should not be ignored either because it is an obvious symptom that the rise in interest rates is producing its effects, especially on all those who are sensitive… because they are highly indebted, which is the case for certain industries and the real estate sector in particular.
It is on these difficulties that the Bloomberg site informs us in this article (source here).
Starwood Capital Group was one of the latest companies to fall victim to rising rates when it failed to refinance or repay its loan when its mortgage on Tower Place 100 in Atlanta, Georgia expired on July 9, according to Bloomberg.
The report says the lenders have hired legal counsel and are in the process of negotiating an agreement.
In Atlanta, the rental vacancy rate in office real estate is 22.4% while in the specific case of Tower Place 100, it was only 62% let at the end of 2022, according to the report.
Starwood Capital Group is not the first corporate owner to default on its loan. Other businesses are also lacking, primarily for office properties amid weakening demand for space due to the work-from-home surge that has flourished during the COVID-19 pandemic. In February 2023, Brookfield Asset Management defaulted on loans for two Los Angeles office buildings due to a lack of demand for the space, according to Bloomberg.
Interest rate hikes take time to take effect in the economy. It takes at least 12 to 24 months to see the consequences materialize.
We are just beginning to see the recession looming.
It is already too late, but all is not lost.
Prepare yourselves !
2023-07-21 08:30:00
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