News this Week in Commercial Real Estate
Royal Bank of Scotland’s new-issue, multi-borrower CMBS deal, now being scaled back to $309.7 Million, is being marketed and, according to Commercial Mortgage Alert, will not have a B-Piece. CRE Finance Council President Patrick Sargent, who spoke with GlobeSt.com following the news, said he believes deals of this kind may be a harbinger for good things to come, adding that the lower-risk nature of new-issue CMBS deals is increasing investor comfort. “There’s a lot of money out there waiting,” he said.
While noting that losses from commercial real estate will continue to be a problem for the broader economy and particularly for smaller banks, Timothy Geithner did tell CNBC that the looming commercial real estate issue “can be managed.” The U.S. Treasury Secretary was responding to an earlier comment by Congressional Oversight Panel’s Elizabeth Warren who said, by her estimation, fifty percent of all commercial real estate loans will be underwater by the end of this year, with dangerous concentrations within midsize banks.
Meanwhile, with the White House indicating financial reform should be passed by the Senate by the end of May and early momentum for the bill gaining steam, Tennessee Republican Senator Bob Corker has now told the Wall Street Journal that he “absolutely” cannot support the legislation as it currently stands.
Federal Reserve Governor Elizabeth Duke said commercial real estate has hit a “rocky bottom,” adding the Fed generally believes issues with commercial real estate lie in economic fundamentals rather than overbuilding. She made her comments during Q&A at a banker conference in Arizona.
Borrowers of the Federal Reserve’s Legacy TALF program, which closed this past week, tapped the U.S. central bank for about $12 billion in reduced-cost loans to finance purchases of CMBS since July 2009, the first month of the legacy program. The Fed approved 91% of legacy-loan applications and is generally credited for tightening spreads and restoring some confidence among buysiders.