This episode of First Draft Live is presented by Agora.

The godfather of the CMBS market issued a warning that commercial real estate is not out of the woods of its downturn, which is a potential problem for the U.S. economy. 

“The losses in CRE are so big that the rippling effect of those losses to the economy are so big that they could be quite harmful,” Ethan Penner, the founder of Mosaic Real Estate Investors, said on this week’s First Draft Live.

Roughly $23B of CMBS loans have matured without a resolution, and more than 10% are delinquent or in special servicing. Yet the CMBS lending market is roaring, with $60B in new debt issued in just the first six months of this year.

“The truth is there are massive, massive losses in real estate,” said Penner, who is credited with inventing the commercial mortgage-backed security in the early 1990s. “These are breathtaking losses, and I think that clearly the system hasn’t recognized that on any level.”

Penner also spoke about his candidacy for the California governor’s race in 2026, with a platform focused on deregulation and a radical new approach to the homelessness crisis in the state.

“I don’t know where the toilets are in the state house, that makes me an outsider,” he said. “But I do know that the systems are broken.”

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