New Report Quantifies Impact of Economic Slowdown on Commercial Real Estate Credit Performance

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The white paper assesses exposure to loss of principal in GL 2. It shows that such debt appears to offer reasonable downside protection up to and including a reduction in property values ​​similar to what has happened. produced in the aftermath of the 2008 global financial crisis (GFC).

Leading investment banker John B. Levy & Company today released the latest white paper on the Giliberto-Levy Index. The study examines how declines in property values, such as those that might occur during a recession, could affect the performance of high-yielding commercial real estate (CRE) debt.

The paper uses data from the Giliberto-Levy High-Yield Debt Index, also known as GL 2, the first and only third-party measure to monitor high-yield commercial mortgage debt. The GL 2 tracks high yield loans representing a variety of property types and multiple mortgage categories. It gives high yield investors insights that weren’t available before.

The white paper assesses exposure to loss of principal in GL 2. It shows that such debt appears to offer reasonable downside protection up to and including a reduction in property values ​​similar to what has happened. produced in the aftermath of the 2008 global financial crisis (GFC).

The white paper also notes that marking investment stocks to market is not the same as realizing a loss. During the GFC, some positions were marked near zero and then recovered as the economy rebounded. Other posts suffered losses of up to 100% in write-offs. The study’s analysis applies to either scenario: temporary “on paper” losses or irrecoverable “real” losses.

Investors in high-yield CRE debt should remain vigilant, the white paper concludes.

Published on a quarterly subscription basis, the GL 2 Index was co-created by John B. Levy, Chairman of John B. Levy & Company, and investment manager Michael Giliberto. The pair also publishes the Giliberto-Levy Commercial Mortgage Performance Index (GL 1), which provides a quarterly performance benchmark for investment in prime real estate debt in the private market since 1993.

For more information on GL Indices and the “High-Yield CRE Debt Principal Loss Exposure, July 2022” white paper released today, please see jblevyco.com.

This report does not constitute an offer to sell securities. Past performance is not indicative of future results.

About John B. Levy & Company

John B. Levy & Company, Inc. is a real estate investment bank founded in 1995 and based in Richmond, Virginia. The company raises equity and debt for developers and owners of commercial and multi-family projects. For more information and to contact the firm for executive interviews, visit jblevyco.com.

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