Your asset may be doing fine and throwing off a decent return, but if you can't sell at a high price due to the lack of debt for a buyer, then the value of your asset will decline, and that is exactly what is happening.

It should be readily apparent by now that the cycle has turned and the big party is over. It is not that we are going to have any sort of crash, but it is time for a reset for the same reason as it always is, the capital markets are volatile, CMBS is shut down and the low cost of capital easy money is now no money or very expensive money. For the past 6 years we have had super accommodative monetary policy from the Fed which inflated asset values by creating a fictitious low borrowing rate. CMBS returned to accommodate aggressive lending and the mezz market was reactivated to push leverage up to the same irresponsible high levels from before 2008. Now the candy has been taken from the baby and the crying has begun. Borrowers are suddenly stuck with maturing debt and nowhere to turn other than gap equity or hard money lenders. With the $175 billion of maturing loans, and no CMBS market, there will inevitably be defaults, loss of control to gap equity providers, or very high cost loans which could default if the economy falters.

Rents may still be rising in some markets, hotel revpar may still go up 1% or so, but operating costs and especially low level wages will be rising with the new Democratic pushed minimum wage of $15. Regulatory burdens continue to increase until Obama is out of office, and assuming a Republican wins and can undo the damage. NOI for hotel especially, but for other property types, will be squeezed as capital costs rise faster than may be able to be serviced without a functioning CMBS market. There are few more if any ups left, and the downside is becoming much more real as transaction volume has dropped 50% and owners who need to sell or whose loans are maturing are forced to discount the sales price. Now that debt is so hard to find and when found is lower level leverage, and more expensive, buyers cannot make the returns they seek at the bubble prices that the bid market has created when cheap and abundant debt was easy to find. Now that debt is a problem, equity has become far more cautious and will not step up to the inflated bids as they see that the ups are gone and the downside is very real.

China has made it much harder to get the money out, and the anti corruption program has made it dangerous for many EB 5 and other investors to show the money. Small and medium sized companies are in default all across China, so the owners who thought they had a lot of excess capital now need that money to stay in business. Lending officers at banks, most of whom were taking payoffs from borrowers are now hiding the money they stole. Russians are gone, Japanese are holding back from the US and Latin Americans got their money out a long time ago. The Arabs also got their money out a long time ago and they are now just wanting to stay alive. It is not that there is no offshore capital, but it is less than it had been and will shrink further.

Your asset may be doing fine and throwing off a decent return, but if you can't sell at a high price due to the lack of debt for a buyer, then the value of your asset will decline, and that is exactly what is happening.