The Giliberto-Levy High-Yield Real Estate Debt Index, or G-L 2, took a considerable drop in its total return, sliding to 0.92% from the second quarter's 1.99%.
RICHMOND, Va., Jan. 22, 2024 /PRNewswire-PRWeb/ --
- "Winter is Coming"
- Distressed office loans are now valued at $0.50 on the dollar
- Office building loans have ranged from extraordinarily light to virtually nonexistent.
The Giliberto-Levy High-Yield Real Estate Debt Index, or G-L 2, took a considerable drop in its total return, sliding to 0.92% from the second quarter's 1.99%. Here are a few interesting thoughts about the third quarter's performance:
- Loans in the office sector are facing serious challenges. For example, distressed office loans in the G-L 2 were valued at about $0.50 on the dollar on average. Additionally, several loans were written down to zero, bringing to mind the GFC days of 2008-2009. In the language of "Game of Thrones," prepare yourselves, "Winter is Coming."
- Some 85% of the G-L 2's principal balance is now floating rate. Interestingly, when the index started in 2010, the fixed/floating relationship ratio was almost reversed. To no one's surprise, as floating rate indices have increased, so has the G-L 2's income return, up at 2.66% from 2.46% in the second quarter. The rolling 12-month total return as of September 30th was 5.95%.
- With regard to commitments, the G-L 2 was, somewhat surprisingly, on a roll with more than $830 million in new commitments, up quite a bit from the second quarter pace. Interestingly, we also saw a similar volume uptick in the G-L 1, our fixed-rate senior loan originations index. Credit events were up materially from 2.69% at the beginning of the second quarter to 3.2% at the end of the third quarter. We have no reason to believe that that trend will be stopping anytime soon.
- Office building loans have ranged from extraordinarily light to virtually nonexistent. In fact, in a limited survey of October and November office building loans (G-L 1) taken on behalf of an institutional client, there were zero new office building loans.
If you have questions about the G-L 2 or want more information, please call John Levy at 804-500-9025 or Julia Grant at 804-500-9026.
John Levy is President of John B. Levy & Company, Inc. and was a monthly columnist for Barron's for over 23 years. He may be reached at [email protected] or 804-500-9025. Visit www.jblevyco.com for more information.
Broker-dealer services are provided through Pickwick Capital Partners LLC Member FINRA SIPC
Media Contact
Julia Grant, John B. Levy & Company, Inc., 1 8045009026, [email protected], John B. Levy & Company, Inc.
John Levy, John B. Levy & Company, Inc., 1 8045009025, [email protected], John B. Levy & Company, Inc.
SOURCE John B. Levy & Company, Inc.

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