Bonds tied to Amazon's (AMZN, Financial) warehouse empire are starting to wobble. Around $2.7 billion worth of securities issued by Affinius Capital (formerly USAA Real Estate Group) are now trading as low as 81 cents on the dollar. Investors appear uneasy—and for good reason. A similar set of bonds from Fortress Investment Group just ran into refinancing trouble, with some of its notes changing hands at just 75 to 82.5 cents. Fortress warned in late June that it was working on a fix, but the deadline came and went earlier this week.
Both sets of bonds are now facing the same headwind: higher-for-longer interest rates. Affinius' debt, issued back in 2021, comes with a ticking clock—principal needs to be repaid by October 2026, or interest rates jump sharply. And even if Affinius does pull off a refinancing, it'll be at much steeper rates than it locked in four years ago. That could significantly eat into cash flows generated from the Amazon lease payments, turning what once looked like rock-solid real estate income into something much more fragile.
Unlike traditional CMBS structures, these asset-backed deals include hard interest step-up clauses if deadlines are missed. That adds pressure—and investors are watching closely. Fortress declined to comment. Affinius hasn't responded. But the pricing action suggests bondholders are no longer assuming a smooth glide path. If refinancing challenges continue, this could be a preview of broader stress in rate-sensitive corners of the real estate credit market.
