Bob Fraser warns that rising interest rates and unfavorable cap rate movements can tank commercial property values, forcing owners to liquidate and wipe out equity. Bridge lenders have largely disappeared, flooding the market with Class C and some Class B properties as owners can't refinance.
What happens if 3 years from now when that note is now due, that interest rate rises? And what if now you can't cover your debt service because you have a little bit of a recession? And because if cap rates went the wrong way, the property isn't worth what it is. You are forced to liquidate. You can't refinance and you're not going to break even. On this property and you're going to see a lot of equity wipeouts and it's playing out. It's playing out. So you could talk about the bridge debt space a little bit here, but we're seeing a lot of properties coming on the market, especially the Class Cs and the, you know, and to some degree the Bs coming back. And that's primarily an age designation, you know, but I think those coming back in the market and the bridge debt is no longer available. All of a sudden the bridge debt guys have just pretty much disappeared.
