JPMorgan Chase has given investors a warning in a note to pass on REITs that focus on commercial real estate debt, reported Crain’s New York.
“In preparation for a now base-case recession…we are downgrading our recommendation on REIT credit to underweight from neutral,” it reportedly wrote.
The note was triggered by “significant” changes in spreads, which measure the difference between CRE mortgage yields and comparable Treasurys. Between April 1 and the 8th, the spreads had widened by 20 basis points for high-quality commercial mortgages and the 10-year Treasury yield, a standard comparative value. For riskier investment-grade loans, the spread was 150 basis points.
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