The Unhedged Debt of Real Estate

Last week, Blackstone announced that it was not going to pay mortgages on a group of 10 offices in Las Vegas. This follows other lenders like PIMCO, Brookfield, real estate owners who have great balance sheets and you wouldn't think have trouble paying loans. Instead of trying to sell these buildings at distressed prices, they've just returned the keys to lenders. Think of real estate as a very slow moving hedge fund. A hedge fund can get wiped out overnight because of its leverage. Real estate borrows money over a long period of time.