Fed’s TALF not stimulating much of anything in CMBS

July 16, 2009

The numbers are out and they’re not looking too good for the commercial real estate market. Investors only applied for $669 million of loans using old, or legacy, CMBS, as collateral, Reuters is reporting. No one requested loans from the New York Fed using new CMBS, but that’s hardly a surprise since the market has been frozen since last year.

The Fed is hoping to jump start the $700 billion market for CMBS because without it the commercial real estate market is in big trouble. With banks and insurance companies no longer in the commercial real estate lending business, the securitization market is shaping up to be the last great hope for developers and property owners who need to refinance maturing debt.

Considering the amount of commercial loans estimated to mature this year – between $300 and $500 billion – TALF hardly looks like it’s going to save the day.

This is the second round of financing for new CMBS and the first time the Fed is accepting legacy CMBS.

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Without some form of program to release the CMBS logjam, the commercial real estate market has no chance of recovering for an extended period of time.

In addition to the mentioned 300-500 billion coming due in 2009, we are faced with another $1 trillion in the next 3 years. Many of those deals are under water in terms of debt service coverage and will create havoc when they mature

Posted by henry lorber | Report as abusive