Charlie Munger says the U.S. commercial property market is in trouble

The 99-year-old investor told the Financial Times that U.S. banks are packed with “bad loans” that will be vulnerable as “bad times come” and property prices fall.

“It’s not nearly as bad as it was in 2008,” he told the Financial Times in an interview. “But trouble happens to banking just like trouble happens everywhere else.”

Munger’s warning comes as U.S. regulators have asked banks for their best and final takeover offers for First Republic by Sunday afternoon, the latest in what has been a tumultuous period for midsized U.S. banks.

Since the failure of Silicon Valley Bank in March, attention has turned to First Republic as the weakest link in the American banking system. Shares of the bank sank 90% last month and then collapsed further this week after First Republic disclosed how dire its situation is.

Berkshire Hathaway, where Munger serves as vice chairman, has largely stayed on the fringe of the crisis despite its history of supporting American banks through times of turmoil. Munger, who is also Warren Buffett’s longtime investment partner, suggested that Berkshire’s restraint is partially due to risks that could emerge from banks’ numerous commercial property loans.

“A lot of real estate isn’t so good anymore,” Munger said. “We have a lot of troubled office buildings, a lot of troubled shopping centers, a lot of troubled other properties. There’s a lot of agony out there.”