Commercial mortgages

WeWork, once valued at $47 billion, needs to slash costs and shore up its finances as it tries to continue operating.

The former investment type added to net earnings, but a tough market hurt some sectors of it during a quarter in which the company experienced mixed success with M&A attempts.

The coworking giant's spiral hit landlords along the way as it renegotiated and sought to exit many leases.

WeWork may file its Chapter 11 petition in New Jersey as early as next week, the Wall Street Journal reported, citing people familiar with the matter who it didn't name. 

Credit ratings were cut on the highest number of commercial mortgage-backed securities in "recent memory" last week, according to strategists at Bank of America Corp.

Fewer of these mortgages are paying off, adding to the amount of credit on investors' books, the Mortgage Bankers Association said.

The work-from-home era has wrecked old assumptions about the need for office space, leaving an unprofitable glut in the market, Willy Walker said.

Lenders including Goldman Sachs Group Inc. and JPMorgan Chase & Co. have been trying to sell debt backed by offices, hotels and even apartments in recent months, but many are finding that tidying up loan books is no easy feat when concerns about commercial real estate have surged.

The companies have requested an extension of the floating-rate loan, which matured in July, according to a servicer report.

While multifamily late payments were flat, hotel properties continued to improve but office performance deteriorated significantly from the first quarter, the Mortgage Bankers Association said.

The amount of distressed assets rose 10% in the first three months of the year, according to a new report from MSCI Real Assets.

But when compared past periods of upheaval, those rates remain relatively low, the Mortgage Bankers Association report showed.

However, much of the damage could already be priced into the stocks after this latest selloff, analysts said.

The company's recent expansion into commercial servicing is part of a broader effort to build a diversified business model, according to President and CEO Mike Dubeck.

Excluding farms and residential properties, banks accounted for more than 60% of the $3.6 trillion in commercial real estate loans outstanding in the fourth quarter of 2022, with smaller institutions particularly exposed, according to the Federal Reserve's semi-annual Financial Stability Report published last week.

The five-year notes benefit from overcollateralization equal to 35%, and will use the proceeds to repay a line of credit facility.

Only about $4.27 billion of the bonds have been issued so far this year, down from $29.38 billion at this same point last year, according to data compiled by Bloomberg based on deals without government backing.

Nonbanks will probably see the least change, while securitization lenders, depositories and REITs are likely to experience the most, an Urban Land Institute survey suggests.

Banks including Wells Fargo, Bank of America and JPMorgan Chase have pulled back on financing for offices and other commercial real estate following a record burst of lending in the first half of this year. 

The Mortgage Bankers Association forecast comes as bankers continue keeping an eye on their commercial real estate portfolios, including office buildings. The MBA also noted that many companies have long-term leases on their offices, likely making the hit more gradual.