Keeping a close eye on the market’s ups and downs, O’Leary Ventures Chairman and “Shark Tank” investor Kevin O’Leary sounded the alarm on a group of stocks that are in dire trouble.
“It’s getting worse by the week,” O’Leary said of the commercial real estate sector on “Varney & Co.” Friday. “And lots of private equity firms are admitting there’s cracks in the system. It’s based on debt.”
“The debt was raised for these buildings back at 3, 4 and 5%, now they’re dealing with 9 to 14% and refinancing them,” he continued. “That makes these buildings uneconomic.”
The threat of a commercial real estate market crash has been hanging over the already fragile U.S. economy as approximately $1.5 trillion in commercial mortgage debt is due by the end of 2025.
But steeper borrowing costs, coupled with tighter credit conditions and a decline in property values brought on by remote work, have increased the risk of default: Fitch Ratings already estimated that 35% – or $5.8 billion – of pooled securities commercial mortgages coming due between April and December 2023 will not be able to be refinanced.
“Unfortunately, what we have is many of them are on the balance sheets of regional banks, up to 40% of their balance sheets. These are going to come through, rolling through refinancings over the next 18 to 30 months,” O’Leary explained. “We’re going to see more cracks on regional banks, and that’s putting pressure on the loan books of those banks which are hitting small business.”
Regional banks are the biggest source of credit to the $20 trillion commercial real estate market, holding about 80% of the sector’s outstanding debt. Regional banks were just at the epicenter of the upheaval within the financial sector after Silicon Valley Bank’s collapse, and there are concerns that the turmoil could make lending standards drastically more restrictive.
“That was another issue that [Gary] Gensler was dealing with, because he hasn’t given the rules for liquidity demands and liquidity on the balance sheets of regionals,” O’Leary expanded. “And the regions are putting up their hand, talking to their congressmen and women saying, ‘What is it with this guy? Give us some direction.’”
“Make it clear, all the regulators including him,” the “Shark” added. “We need rules so we can open our loan books again.”
The millionaire investor voiced support for Senate Republicans’ proposition to guarantee a payroll account for regional banks that bears no interest up to $100 million for 24 months.
“So as these banks collapse or fail or merge or acquire, your payroll account is protected. I 100% endorse that idea,” O’Leary said. “And everybody should, it should be a bipartisan issue because you don’t want a regional bank failing because… many payroll accounts on Wednesday nights are way over $250,000. They have to pass that bill.”
FOX Business’ Megan Henney contributed to this report.
Tech billionaire Elon Musk is deeply concerned about illegal immigration through the Mexican border.
Musk visited the southern border in Eagle Pass, Texas, on Thursday and has since spoken out about his concerns regarding the illegal immigration crisis.
The social media mogul said of the border Friday that the “situation is beyond insane and growing fast.”
Musk, who owns Tesla, SpaceX and X, has shown significant interest in the ongoing crisis along the border and has been posting about it frequently on X, the social media platform formerly known as Twitter.
Musk toured the border along the bank of the Rio Grande with Rep. Tony Gonzales, R-Texas, to see firsthand the ongoing migrant crisis, which he has called a “serious issue.”
At one point, Musk started a short live stream with personnel working to secure the border in Eagle Pass.
Musk, an immigrant himself, provided a verbal disclaimer about his views during the stream.
“As an immigrant to the United States, I’m extremely pro-immigrant. I believe that we need a greatly expanded legal immigration system and that we should let anyone in the country who is hard-working and honest and will be a contributor to the United States. We should have expedited legal approval for anyone who falls in that category,” Musk said in the video.
He continued, “But by the same token, we should also not be allowing people in the country if they’re breaking the law. That doesn’t make sense. The law is there for a reason. I think we want to do both things.”
More than 3,000 flights have been delayed in the United States Friday, as the New York City metropolitan area and the Northeast in general have been getting drenched with torrential rain and flooding.
Data from the website FlightAware shows that as of early this afternoon, at least 264 flights have been delayed coming into or departing from New York City’s LaGuardia Airport, while another 234 have been canceled.
The airport said in a tweet that “Terminal A is closed until further notice,” as images are emerging purportedly showing people inside the building trudging through floodwaters.
“All #LGA ticketed passengers should confirm their flight status prior to traveling to the airport,” they added.
Another 336 arriving or departing flights have been delayed at nearby John. F. Kennedy International Airport, which also has been hit with 66 flight cancelations, according to FlightAware.
In New Jersey, more than 175 flights have been delayed coming into or leaving Newark Liberty International Airport.
The travel disruptions at airports come as the Metropolitan Transportation Authority has suspended service across parts of the New York City subway system and Metro-North commuter railroad.
New York Gov. Kathy Hochul said she is declaring a “State of Emergency across New York City, Long Island, and the Hudson Valley due to the extreme rainfall we’re seeing throughout the region.
“Please take steps to stay safe and remember to never attempt to travel on flooded roads,” she added in a tweet.
As of mid-morning, nearly six inches of rain had fallen on Brooklyn, according to FOX Weather.
“I want to say to all New Yorkers, this is time for heightened alertness and extreme caution,” New York City Mayor Eric Adams has warned. “If you are home, stay home. If you are at work or school, shelter in place. For now, some of our subways are flooded, and it’s extremely difficult to move around the city.”
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