Most Of The Distress In Commercial Real Estate Right Now Isn’t Bad Operators. It’s Basis Risk
In this monologue, Hannah Hammond explains that the current turmoil in commercial real estate (CRE) is driven less by incompetent developers or operators and more by “basis risk” arising from the structure of commercial loans. She outlines how CRE loans typically have short reset periods (3‑7 years) rather than 30‑year fixed rates, meaning that investors who bought properties at historically low rates (e.g., 2%) paid a premium based on those rates. When rates reset higher, the property’s valuation— which moves inversely with interest rates— can fall sharply, threatening the equity built over the past two decades. Hammond argues that it is wiser to purchase at a low price with a higher rate than to overpay at a low rate, noting that historically higher‑rate environments are far more common than a sustained 2% rate. She also notes that cash‑rich investors are poised to acquire distressed assets, further highlighting the systemic nature of the risk.
Chapters
More from Hannah
Never Waiver On Your Values—No Matter How Lonely, Uncomfortable, Or Difficult The Journey Gets
Stop Asking “How?”—The One Question That Will Help You Scale Faster Than You Ever Thought Possible
4 Life Lessons That Took Me 30 Years To Learn—But You Can Learn Them All In Just 14 Minutes
