Commercial Real Estate Debt Sustained by Bond Buying

Europe’s downtown office buildings are empty, and malls and main streets are deserted, yet the biggest landlords are staying afloat during the Covid-19 pandemic thanks to robust central-bank buying of bonds backed by property debt.

Some worry that the policy is obscuring long-term pain should workers and shoppers never return in their pre-coronavirus numbers.

Shares in Unibail Rodamco Westfield SE, one of Europe’s largest commercial real-estate investment trusts and the owner of malls, offices, hotels and exhibition centers, are down by more than 50% from this time last year.

Unibail’s debt, however, is holding up fine. The yield on a 5-year bond issued by its real-estate development business was at 1.67% on Tuesday, more than a full percentage point lower than a year earlier. The European Central Bank last bought bonds issued by Unibail in the week of Jan. 8, according to public filings.

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