JER Investors Trust, a mortgage real estate investment trust, filed for Chapter 11 bankruptcy protection on Friday, following other commercial real estate companies struggling with high interest rates and a lack of demand, according to Bloomberg.
The company filed for bankruptcy in Wilmington, Delaware, claiming more than $100 million in debt and less than $50 million in assets, and used Chapter 11 protection to temporarily suspend payments on most debts, according to Bloomberg. It is said that the closure was avoided. JER’s bankruptcy signals a growing debt crisis in the commercial real estate sector. Delinquencies have risen sharply over the past year due to high mortgage rates, more people working remotely and weaker demand for commercial buildings. (Related: Local banks are going bankrupt due to interest rate hikes due to inflation)
JER manages commercial real estate debt with a portfolio of mortgage-backed securities, but rising interest rates have hurt profitability, according to Bloomberg. Interest rates are facing upward pressure from the Federal Reserve, which has set the federal funds rate in the range of 5.25% to 5.50% to combat high inflation, the highest level in 22 years. ing.
BREAKING NEWS: The bank failure that began in March was not resolved.
of @federal reserve By simply hiding the ongoing damage, US banks continue to face insurmountable debt bombs and massive bank failures!
When the commercial real estate bubble bursts, banks will fail! JB pic.twitter.com/Q7EXSWdDIU— John Basham (@JohnBasham) December 29, 2023
WeWork, which provides flexible workspace rentals, filed for Chapter 11 bankruptcy in November, even though high interest rates from venture capital at one time valued it at $47 billion. As of September, the company had 777 leases, accounting for about two-thirds of its operating costs.
Another real estate company, Pennsylvania Real Estate Investment Trust, also filed for bankruptcy in early December, the second time in the past three years, according to Bloomberg.
Commercial real estate is struggling to drum up interest in real estate as demand collapses due to the COVID-19 pandemic, according to a report from Cushman & Wakefield. Workers and employers are being forced online, and some are reluctant to give up. As a result, the office vacancy rate rose from about 13% in 2019 to about 20% as of the third quarter of 2023.
JER did not immediately respond to a request for comment from the Daily Caller News Foundation.
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