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Old 02-10-2009, 11:45 PM
Hatterasguy's Avatar
Join Date: Nov 2002
Location: Milford, CT
Posts: 19,307

Commercial Mortgage Industry to Cope With Pending Maturities
Jan 14, 2009 - CRE News
The biggest challenge facing the commercial mortgage market this year is the estimated $270 billion of mortgages that come due.

In a less-volatile year, that volume would be easily refinanced. Indeed, in 2007, nearly $508 billion of commercial mortgages were originated, according to analysis by the Mortgage Bankers Association. A whopping $230 billion of that was in the form of CMBS.

But most lenders have sharply curtailed their activity. The CMBS market, for instance, is virtually shut down and most participants don't expect any issuance this year. And insurance companies, which had been providing some $40 billion of mortgages annually, are expected to cut that volume back by some 25 percent or more.

Banks, meanwhile, which hold nearly half of the commercial-mortgage debt outstanding, are facing capital issues that are expected to result in their cutting back origination activity as well. And many banks are expected to dedicate their origination capacities this year to restructuring and extending existing loans.

Into that void are stepping opportunistic players. But not yet. A panel of lenders at this week's Commercial Mortgage Securities Association's annual investors conference in South Beach Miami are all geared up to start lending. But those opportunities have yet to materialize as borrowers need to raise capital to shore up equity positions in their properties. What's more, they're said to be turned off by what in previous years might have been considered usurious rates required by the new breed of lender.

In addition to the handful of opportunistic players - that number is sure to increase as patient capital recognizes the risk-adjusted yields available - special servicers for CMBS deals are expected to actively extend maturing securitized loans. But those extensions will come with costs. Services are likely to include incentives for borrowers to refinance their loans as quickly as possible.

Some 700 market participants registered for this year's conference, which is down from last year's 1,300. That was a surprisingly large turnout for such an event, given that CMBS volumes had fallen by 95 percent in 2008 when compared to the year before.

You have to love capitalism, where there is a need...there is a dollar. I love this line: Into that void are stepping opportunistic players. But not yet.

This year is shaping up to be a blood bath in the commercial RE world, all the vultures are waitng.

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