You're correct about LTV, but over 2020-2021 many buildings sold at 'cap-rates' of 2%. (A Cap rate is the yield on the building and effectively an inverse P/E ratio.) However, cap rates are now moving towards 4.5%-5% as interest rates went from 0%->4.5%. And we expect Cap rates to end up slightly higher than interest rates, say 5% or 6%.
So when cap rates double the implied value of the building falls by 50%. Effectively the building goes from being valued at a P/E of 50 (cap rate 2%) to a P/E of 25 (cap rate of 4%).
So the halving of the building's value, as cap rates move in response to interest rates, may mean that a 50% LTV loan is now underwater. Especially if the building is unoccupied or may soon be unoccupied.
So when cap rates double the implied value of the building falls by 50%. Effectively the building goes from being valued at a P/E of 50 (cap rate 2%) to a P/E of 25 (cap rate of 4%).
So the halving of the building's value, as cap rates move in response to interest rates, may mean that a 50% LTV loan is now underwater. Especially if the building is unoccupied or may soon be unoccupied.