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The Cycle Has Turned

As debt markets falter and values are declining

By Joel Ross | joelross | Updated on April 02, 2016

joel-ross

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.

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