Marcus Ashworth, Columnist

Real Estate Billionaire Is Right to Sound the Mortgage Alarm

The commercial real estate sector might end up needing some emergency triage.

March 24, 2020 at 2:50 PM UTC

Marcus Ashworth is a Bloomberg Opinion columnist covering European markets. Previously, he was chief markets strategist for Haitong Securities in London.

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The U.S. commercial real estate sector could be the next shoe to drop for the Federal Reserve; it may need some emergency triage. There were $3.66 trillion of commercial mortgage-backed securities outstanding at the end of 2019, more than one-fifth of the overall U.S. mortgage securities market. And the signs of distress are appearing.

Real estate investor Tom Barrack has issued dire warnings of a “domino effect” of margin calls, cross defaults and other related debt failures if financing in the sector dries up. To prove his fears might be well placed, Invesco Mortgage Capital Inc., a real estate investment trust, said on Tuesday that it can’t make its margin calls (demands for extra capital or securities that kick in when asset prices fall). It won’t be alone.