The 'Extend and Pretend' game is officially over. A landmark sale of a Class-A office tower in San Francisco for $100/sqft—down 75% from its 2019 valuation—has set a terrifying new comparable for the market.
Regional banks (KRE) are taking massive haircuts on their loan portfolios. We expect a wave of consolidation in the banking sector as smaller players are forced to merge or fail. Meanwhile, Private Credit funds are raising record amounts of dry powder to act as the liquidity providers of last resort.
Investment Implication: Avoid regional banks. Look for distress-focused alternative asset managers.