Magic still doesn’t happen
by Amy Castor and David Gerard
https://www.youtube.com/watch?v=fy9P7CN-atM&list=UU9rJrMVgcXTfa8xuMnbhAEA - video
https://pivottoai.libsyn.com/20261106-tech-stocks-crash-and-so-do-data-center-loans - podcast
time: 6 min 35 sec
I’m not saying there isn’t a problem with data centers but once again, this is a normal part of commercial real estate. This happens to loans of every type including fast food, Hollywood studios, malls, airports, hotels, apartments, warehouses, industrial/manufacturing, office buildings, everything.
I am a Senior Loan Analyst who works on Commercial Mortgage Backed Securities.
Selling loans is incredibly normal, especially for smaller and mid sized banks that can’t afford to keep them on the books long term but it’s also very common for large banks.
EDIT: Not saying Data Centers aren’t in trouble. I personally think it’s a risky investment. I just wanted to provide a little industry context.
Presumably you still need to believe that these are the specific loans that you are least likely to see a return on though, otherwise why get rid of them?
The way the bubble pops will probably be a bunch of normal things happening, except cumulatively they cause investors to shy away from further bankrolling this mess and someone important won’t have enough money at some crucial point. It certainly won’t be sam altman laughing maniacally and dissolving into a mound of scurrying cockroaches.
It’s a Dutch bank, the Dutch pension scheme is in the process of moving from a benefits defined pension scheme (payment known upfront) to a contribution based pension scheme (payment being based on returns). Hence their pension funds have primarily held bonds, that’s changing as historical returns on stonks have been higher.
Whether ING has any pension related holdings, no clue. But that right here could very well be the reason. It’s also the single biggest factor for why the bond rates are rising globally. It’s estimated to impact about 3TN € worth of capital on the European bonds market, once the transition is in full effect next year
That’s interesting, thanks! Not exactly sure where the dc loans fit in the benefits vs contributions scheme, but I guess it’s important context to keep in mind if reading further into this.
The primary difference between a bond and a loan, are the installments. A loan will gradually be paid off, whilst a bond will pay interest yearly and then one installment upon expiration.
So from a return perspective, they’re both having a fixed return and therfore fits defined contribution schemes nicely. As they can sort of guarantee they’ll have the money they’ve promised the pension holder 10 or 30 years down the line
To be fair, I don’t work with this specific bank so I can’t say their reasoning but I will say banks that originate a loan don’t really keep it in their books.
Also, commercial real estate frequently gets sold off and bundled into portfolios. These portfolios have a mixture of asset types. Investors buy percentage of the return from those portfolios.
The idea is that if one asset or asset type fails, it doesn’t tank the whole investment. It’s a safer way to invest. Many retirement accounts have similar investments for that exact reason.