Posted by: BayAreaComRE | January 26, 2010

Capital Markets Update – Week of Jan 25th

Lenders continue to bid aggressively on high quality loans with institutional borrowers. Spreads have tightened 15-25 basis points in the past 30 days for fixed rate 5-10 year loans. In addition, we are seeing more interest from regional and money center lenders trying to make 3-5 year floating rate loans. The banks are still requiring full or partial recourse for most of their financings, but their rates, even with LIBOR floors of 1-2%, are attractively priced.

As the number of seriously delinquent loans continues to increase, there is growing capital pressure on the special servicers from loans that require funding to cover debt service, operating costs and other fees. Nearly 9% of all Commercial Mortgage Backed Securities (CMBS) loans have been referred to the special servicer, which includes delinquent and defaulted loans as well as loans seeking extensions or other loan modifications. This capital pressure comes at an unfortunate time since many special servicers are struggling to remain solvent as the value of their portfolios of subordinate CMBS securities have cratered (special servicers were also active buyers of CMBS paper; that’s generally how they secured the special servicer designation in the first place). LNR, with a special servicing portfolio of $17B, is reportedly readying itself for a bankruptcy filing. This follows on the heels of Capmark’s filing in October and closely mirrors the situations at Centerline and Anthracite. The end result may be a greater willingness to push assets out the door rather than extending loans or holding them.

As of January 2010, 13 of the 15 largest delinquent CMBS loans were secured either by New York City multi-family (e.g., Riverton) or lodging assets (e.g., Extended Stay). While the problems in CMBS are being felt in every asset class and every market, it is interesting how concentrated the largest problem loans are in terms of geography and asset type.

More information can be found here.

Thank you to Chris Moyer of Cushman & Wakefield Sonnenblick Goldman, for the update.

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  1. […] posts can be found here: March 10, Jan 26th, & December […]


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