Rumored Trouble at Pendry West Hollywood

Two weeks ago on the Native Angelino Podcast, we asked whether the events at?New York Community Bank (NYCB)?signal tough times ahead, i.e., the proverbial "canary in the coal mine."

The Second Canary in the Coal Mine, or Just Another Datapoint

Yesterday, The Real Deal?ran a story highlighting a potential debt crisis at the highline Pendry West Hollywood. For those unfamiliar with the site, this is the plot formerly occupied by the House of Blues on Sunset Boulevard across the street from The Comedy Store.

TRD states:

...the project was appraised at nearly $526 million. That was in 2021, after the duo had spent more than $500 million constructing the hotel and attached condo project. They later refinanced the project with $515 million in loans.?

Since then, about 60 percent of the condos have sold, according to one source familiar with the property. This month, the hotel portion was appraised at $139 million.

The firms had tried to sell off the hotel last year, according to one source, with a price tag of about $149 million,... But the hotel got no takers.?

This Time It's Different - A Common Refrain

There comes a point in every market cycle when conflicting signals make it difficult to call a turn.

Today, U.S. equity markets are at all-time highs and mortgage rates have risen to the 7% level. Inflation, broadly defined, is down rather dramatically and food prices remain stubbornly high.

Almost everyday there is a new headline of layoffs, yet consumer spending is booming.

Mixed Signals Everywhere

The bottom line questions:

• What is the overall level of debt in the system?
• Are bad debts concentrated in a few lenders and asset managers?
• Have regulatory oversight and capital requirements been rightsized since the last crisis?
• Will those in need, be able access the capital markets and refinance or raise capital?

What are your thoughts?