 |
|
| View previous topic :: View next topic |
| Author |
CMBS Concerns |
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11253
Location: Los Angeles, California
|
 Posted: Sun Jul 01, 2007 3:22 pm Post subject: CMBS Concerns |
 |
|
Credit concerns now spreading to CMBS deals:
-----------------------------------------------------------------------------------
Commercial real estate investors tap on brakes
Fri Jun 29, 2007 11:02AM EDT
By Ilaina Jonas
NEW YORK (Reuters) - Spooked by higher interest rates and troubles in the subprime residential mortgage market, commercial real estate investors and lenders are rethinking some deals that would have sailed through just six months ago.
"There has definitely been a readjustment," said Marc Schnitzer, chief executive of Centerline Capital Group, a subsidiary of Centerline Holding Co. (CHC.N: Quote, Profile, Research).
"The investors who are buying a lot of the CDOs (collateralized debt obligations), investors that are buying a lot of the CMBS (commercial mortgage-backed securities), have started to push back on some of the more aggressive deal terms," he said this week at the Reuters Global Real Estate Summit in New York.
The meteoric rise of real estate prices over the past few years allowed investors to finance, in some cases, more than 90 percent of their acquisitions using borrowed money, such as mortgages, mezzanine debt and bridge loans.
Much of that debt was then used by investment banks and others to back securities sold to pension funds, university endowments and other institutional investors. The money raised was then recycled back to make more loans.
Such loans would fund purchases of individual properties and large real estate portfolios, such as Blackstone Group LP's (BX.N: Quote, Profile, Research) $23 billion acquisition in February of Equity Office.
The issue of risk, and investors who assume it by purchasing the loans and securities, came under scrutiny in the winter as residential mortgage defaults spiked.
While commercial real estate has not seen the sort of rise in foreclosures the residential market has, lenders and CMBS investors have demanded either to be paid more for risk or that issuers get rid of some of the riskier loans they are selling.
In one deal in April that Schnitzer termed "notorious," issuers of a CMBS -- GE Commercial Mortgage Trust 2007-C1 -- reconstituted it after investors balked at some of the loans. The deal, initially announced at $4.23 billion, closed at $3.95 billion.
"Some loans had to be taken out," Schnitzer said. "Investors tapped on the brakes and pushed back, saying we need higher returns. Makers of CMBS are less certain of how to price things these days."
Colin Dyer, CEO of leading real estate services firm Jones Lang LaSalle Inc. (JLL.N: Quote, Profile, Research), said the market shift gave potential bidders a chance "to pause or to find the math doesn't work any more, and so in some cases we've seen just a reduction in the number of bidders interested in parcels or individual assets."
However, real estate prices remain healthy, experts said, with rents strong and the supply of new buildings for the most part restrained in the United States.
"We continue to believe in the fundamentals of U.S. real estate -- increasing rents and increasing occupancy," said Joseph Parsons, president of GE Real Estate North American Equity.
GE Real Estate, a unit of General Electric Co. (GE.N: Quote, Profile, Research), has about $60 billion invested in global real estate either through debt or ownership. In North America, it has $14 billion of equity invested and $17.5 billion in real estate lending.
"This irresistible force, which is the amount of money trying to get into real estate, is still present," Jones Lang's Dyer said. "For every $1 that gets done there are $5 trying to do the deal."
What is expected to change are some of the players. As the debt-heavy buyers leave the market or become less active, those, such as pension funds and foreign buyers who do not use as much debt, are expected to pick up the slack.
"Those groups have been pleased with the fact that there is less competition for assets," Dyer said. "They're able to get an easier run at assets." |
|
| Back to top |
|
 |
| Author |
CMBS Concerns Replies |
rffrydr
Moderator
Joined: 30 Oct 2005
Posts: 16421
Location: Sunny California
|
|
| Back to top |
|
|
rffrydr
Moderator
Joined: 30 Oct 2005
Posts: 16421
Location: Sunny California
|
|
| Back to top |
|
|
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11253
Location: Los Angeles, California
|
| Posted: Wed Apr 02, 2008 8:37 am Post subject: |
|
|
| Great observation - speaking of DB pension funds, don't forget that April 15 represents the mandatory quarterly contribution date for calendar-year pension plans that are underfunded. Given the current environment, this should provide an additional liquidity boost to the equity and bond markets. |
|
| Back to top |
|
|
rffrydr
Moderator
Joined: 30 Oct 2005
Posts: 16421
Location: Sunny California
|
|
| Back to top |
|
|
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11253
Location: Los Angeles, California
|
| Posted: Fri Feb 22, 2008 2:15 am Post subject: |
|
|
WSJ on the CMBX spread blowouts. All it takes now is for PIMCO or BlackRock to sell a few billion dollars worth of CDSs on the CMBX investment grade indices to see some fireworks on the upside, not to mention a few bank "write ups" as well. Please refer to the link in the above post for some background:
http://online.wsj.com/article/SB120364404215984811.html?mod=hps_us_whats_news
| Quote: | Actual delinquencies on commercial-mortgage bonds hit a record low of 0.27% in January, according to Fitch Ratings. Among 40,000 loans in these bonds, only 293 were delinquent last month. The most bearish market prognosticators predict defaults on commercial mortgages will reach 2% over the next year or so, in line with the historical range. By comparison, the performance of the CMBX implies the default rate could be four times that level, according to analysts. "The level we're seeing in the CMBX right now just doesn't make sense," says Lisa Pendergast, managing director for RBS Greenwich Capital in Greenwich, Conn.
.....
Don Truslow, chief risk officer for Wachovia Corp., one of the nation's largest commercial lenders, said in a Jan. 22 earnings call that the CMBX "has been a large part of the reason for the write-downs and the market marks that we have taken" -- $600 million in the fourth quarter -- even though the bank hadn't seen any material deterioration in the properties or loans themselves. The poor performance of the CMBX, in turn, might be making it even harder for commercial borrowers to get access to credit in an already tight lending environment. |
|
|
| Back to top |
|
|
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11253
Location: Los Angeles, California
|
| Posted: Fri Feb 15, 2008 12:39 pm Post subject: |
|
|
BlackRock on CMBS spreads. They see tremendous value in the seasoned, super senior AAA CMBS sector right now. This is a must-read, but some of their numbers require more disclosure:
http://literature.blackrock.com/estudiocontent/public/CMBS_Special_Report.pdf?PubDate=/2_15_2008_CMBS_Special_Report.pdf
| Quote: | | Assuming a recessionary scenario in which property prices decline 15% to 30% depending on type, JP Morgan calculates that the CMBX.4 AAA index price would be $97.79 as of 13 February. That index is currently trading around $87, about ten points cheaper than predicted by the extreme scenario. We feel the negative momentum in AAA CMBX will ultimately be reversed as fundamental factors prevail. While the sell-off in the ABX indices makes sense due to the poor underlying fundamentals of subprime loans and the possibility of principal losses at the AAA level, the situation is different for AAA CMBX, where it is very difficult to envision a scenario devastating enough to impair a senior AAA class. However, until the CMBX starts to see some short covering to return to prices more in line with fundamental value, it will be difficult for cash CMBS bonds to recover. |
|
|
| Back to top |
|
|
rffrydr
Moderator
Joined: 30 Oct 2005
Posts: 16421
Location: Sunny California
|
| Posted: Thu Dec 20, 2007 7:36 am Post subject: |
|
|
Blackstone back at it:
http://www.cnbc.com/id/22339075
_________________
Today is the Tomorrow you worried about Yesterday! |
|
| Back to top |
|
|
rffrydr
Moderator
Joined: 30 Oct 2005
Posts: 16421
Location: Sunny California
|
|
| Back to top |
|
|
Please log in to view without the ad banners |
|
|
|
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum
|
Powered by phpBB
|
FAQ
Search
Memberlist
Usergroups
Statistics
Register
Profile
Log in to check your private messages
Log in
