Hedge funds are betting against a German lender due to concerns over its exposure to the US real estate market. Short selling positions have been taken against the lender, reflecting worries about potential losses stemming from its US real estate holdings. This move comes amid broader concerns about the impact of the pandemic on the financial markets and specific sectors such as real estate.
The rapid rise in interest rates over the past two years has sparked trouble in the US commercial real estate market, particularly in office and multi-family properties. Lenders are already feeling the heat, with some recording losses and cutting dividends. The wave of mortgages coming due could turn a micro problem into a macro one, potentially leading to a financial crisis. Small US banks with significant non-residential real estate exposure are particularly at risk, and the potential failure of hundreds of smaller lenders could cause chaos in the financial system. Regulators may need to prepare for the worst and be clear about the possibility of bank failures, which could lead to mergers with larger and stronger rivals.
Xinyuan Real Estate's subsidiary, Hudson 888 Owner LLC, has filed for Chapter 11 bankruptcy protection in the Southern district of New York court, with estimated liabilities and assets ranging between $100 million to $500 million. This move reflects the challenges faced by the Chinese developer in the US real estate market and signals a significant financial restructuring.
US real estate, including home prices and commercial values, is expected to face significant pressure due to higher interest rates, according to David Tamil, the president of ProChain Capital. He predicts a multi-year fallout in the real estate sector, with commercial real estate being affected first, followed by housing. In contrast, Tamil is bullish on bitcoin, forecasting a 66% surge to $50,000 by the end of the year, driven by mainstream acceptance and the potential introduction of bitcoin exchange-traded funds (ETFs) by asset managers like BlackRock and Fidelity.
The CEO of real estate investment firm CARROLL, Patrick Carroll, has issued a dire warning about the state of the US commercial real estate market, stating that the office and hotel markets are going to be destroyed. However, he believes that multi-family real estate is a safe haven, with strong fundamentals and healthy market conditions. Investors can get involved in multi-family real estate by investing in residential REITs or using online investment platforms.
