By Kristen Altus

A New York Times bestselling author and a real estate entrepreneur have started to echo similar warning signs amid "massive" issues within the commercial sector.

"It's a slow-moving train wreck," The Bear Traps Report founder Larry McDonald said on "Mornings with Maria" Tuesday. "This is why the Fed is the beast in the market, it has the Fed by a stranglehold because it's close to $2 trillion of maturities in the commercial real estate space. And then, if you look at high-yield leverage loans and investment grade bonds in the U.S. corporate market, it's another $1.9 trillion. So the Fed is going to be forced this year to cut rates dramatically."

"These buildings cannot service the debt," Peebles Corporation founder and CEO Don Peebles added on the panel. "They're worth a fraction of what the original values were when these loans were made. And you're going to see massive defaults because there's no solution in many of these instances."

Their comments are strikingly similar to Cantor Fitzgerald CEO Howard Lutnick’s warning last week that a "generational" shift was on the horizon, painting a "very ugly" picture for America’s real estate market in 2024.

"I think $700 billion could default… The lenders are going to have to do things with them. They're going to be selling. It's going to be a generational change in real estate coming, end of 2024 and all of 2025. We will be talking about real estate being just a massive change, $700 billion to $1 trillion in defaults coming," Lutnick stressed to Maria Bartiromo at the World Economic Forum in Davos.

Larry McDonald and Don Peebles discussed commercial real estate in a "Mornings with Maria" panel Tuesday. (Fox News)

The factors causing default worries is "two-fold," Peebles explained: "One, that these buildings, the contract vacancy rates have increased significantly, up to about 20% in places like New York City, for example. And then of that remaining 80%, less than half of it gets occupied. And that's because there's been a seismic shift on how people work and where they are working."

McDonald agreed with Peebles’ analysis, and both argued the "only way" to help the situation and slow down the default process is with "aggressive rate cuts" from the Federal Reserve.

"I completely agree," McDonald chimed in. "I think somewhere between like March, April, May, the probability of a soft landing in the eyes of Wall Street is going to come down dramatically. And that beast in the market, because of this emerging credit risk, all these maturities within the next two years, that eventually triggers a significant rate cut in the middle of the year."

"And remember, this is the most progressive Fed we've ever seen," McDonald continued. "It's a very left-leaning Fed. So they're going to try to help the current White House. They'll do everything possible."

Credit: FOX Business

By Brian Sullivan

“Florida's now the second largest and strongest residential real estate market in the country,” says  @peebles_don. “Florida will continue to grow because the fundamentals are good… I think Miami’s had a big run [but] I think the opportunities are going to be the west coast.”

Credit: CNBC

Don Peebles, The Peebles Corporation CEO and chairman, joins ‘Squawk Box’ to discuss the commercial real estate sector, potential impact on the financial sector, and more.

Credit: CNBC

By Matt Wasielewski

The owner of the Clevelander South Beach lost many of its hospitality workers during the height of the pandemic as patrons stopped frequenting the hotel and bar.

Credit: Bisnow 

By THE EDITORS 

There is an inner soothsayer in every decent real estate developer.

They have placed a significant bet on the future: What can rise on an empty plot of land? Who must they tap to make this vision a reality? How will this hypothetical building fit into the greater landscape? Who will buy or rent this property?

Credt: Commercial Observer

By Brian Pascus

Don Peebles may be the most equity-minded developer in the country, creating opportunities for those traditionally left at the commercial real estate industry’s margins.

For every Peebles project, he offers 35 percent of contracts to minority- and female-owned businesses. He has spent a lot of the pandemic, too, fundraising for Peebles’ Emerging Development Fund, which invests in minority- and female-owned real estate companies, with the goal of reaching $450 million.

“We level the playing field for women and minorities — and that needs to be closed,” Peebles, one of the nation’s most successful Black developers, said. “While there’s been much more engagement in terms of racial equality since [last summer’s] protests, it’s been more focused in making lower-income people more comfortable as opposed to providing them access to opportunities to build wealth.”

Peebles also spent the pandemic shepherding several projects across the country.

Even as COVID-19 forced the corporation to abandon plans for a hotel project in Philadelphia that had secured financing, Peebles forged ahead. He’s betting big on cities in general with mixed-use mega-projects totaling $4 billion in the works.

Last spring, he reopened The Bath Club, an iconic Miami beach club, which infamously prohibited Jews and Blacks from becoming members about a century ago. Today, after investing in renovations worth $8 million, there are more than 500 membership applications, far more than what the club can accommodate, Peebles said. This time though, everyone is welcomed — if they can pay: the initiation fee costs $20,000 and annual dues are $18,000.

In Downtown L.A., he’s laying the groundwork for Angels Landing, a $1.6 billion, 2 million-square-foot project that would deliver 63- and 42-story towers. The proposal cleared L.A.’s environmental impact review in March 2021, and Peebles hopes the shiny project will open in time for the 2028 Olympics that the City of Angels is set to host.

In Boston’s popular Bay Back neighborhood, his firm is developing another mixed-use project that will cost more than $500 million and encompass 432,000 square feet. It also involves a complex deal for air rights in the Massachusetts capital.—J.E.

Credit: Commercial Observer

The Peebles Corporation founder, chairman, and CEO Don Peebles discusses whether commercial real estate will crash on 'Making Money.'

See the full interview here.