Uncertain Future for CMBS Loans
According to a recent article in the Atlanta Business Chronicle, "$3.7B in CMBS coming due from 2010 to 2012," approximately $3.7 billion in CMBS loans will mature in the Atlanta market alone between now and the end of 2012. This provides a local perspective on a problem playing out nationwide. The CMBS market is not functioning, and as the outstanding loans mature, financing is not currently available.
The striking point about this problem is that there has been no concrete suggestions concerning where liquidity will be found. According to William Boston's article in the Wall Street Journal, there is some indication that overseas investors will view depressed real estate prices and a weak dollar as an opportunity to purchase U.S. assets at bargain prices. But so far, this hope seems to be based mostly on speculation and anecdotal evidence. There has been much talk about the government’s proposed TALF program and whether it will help fill this void. Initial reports indicate that the program is off to slow start.
Unless liquidity returns to debt markets for CRE, it appears that many assets financed by CMBS loans will be turned over to special servicers. And in fact, this is already occurring and accelerating at an alarming pace according to some reports. (To see how this process plays out, see Joel Ross' article from hotelnewnow.com.) What we will likely see is that special servicers will have to get creative in dealing with distressed assets. Much remains unknown concerning how this process ultimately will play out .
