Betting Big in the Debt Underlying Office Buildings

David Rubenstein of the Carlyle Group sees opportunity ahead in the debt underlying the office asset class for investors. 

Office property valuations have been falling since the pandemic brought about lower occupancy rates due to changes in where people work. Those lower valuations combined with rising interest rates have made refinancing a difficult task. Given that most lenders may be hesitant to take the keys after a foreclosure, David sees this as an opportunity to acquire the debt underlying those buildings. 

“Most developers or owners of real estate in downtown office buildings are going to play a game of chicken,” Rubenstein said.

And by the time the keys for the value-stripped properties are eventually handed back to the banks, Rubenstein said the buildings will "be at a bigger discount than anything we’ve seen since the Great Recession."

Interesting take below.