Monday, March 8, 2010
Farkas Closes Deal to Buy Centerline (Wall Street Journal)
New York real-estate investor Andrew Farkas has closed a deal to buy Centerline Holding Co., one of the nation's largest commercial-mortgage-servicing specialists, putting in $100 million in new equity and assuming about $180 million of Centerline's debt. The deal comes at a time that opportunistic investors are targeting servicers to take advantage of the carnage in commercial real estate. Late last year, a venture between Warren Buffett's Berkshire Hathaway and Leucadia National Group bought the commercial-mortgage-servicing business from bankrupt Capmark Financial.
The Verdict on TALF: It Worked (Wall Street Journal)
Program Increased Demand and Credit Flow; Even a Profit?
It took a year, but the Term Asset-Backed Securities Loan Facility, an innovative program designed to stabilize the market for consumer loan-backed securities, has done what it was supposed to: rekindle demand and get credit flowing again. And the part of the program that supported securities backed by consumer loans, which effectively ended Thursday, will have turned a profit in the process, Federal Reserve Bank of New York President William Dudley said.
Tokyo offers support for 'fair value' accounting standard (Financial Times)
Japan will adopt a controversial "fair value" international accounting rule for some of its companies, bolstering the position of the global standard setter after setbacks in the US and Europe. Fair value accounting, or valuing assets at market prices, has unleashed one of the most divisive debates to have emerged from the credit crisis, threatening to disrupt a pledge by the G20 group of leading economies to create a single, global accounting system by mid next year. The US and Europe have failed to agree on the degree to which fair value, or "mark-to-market", accounting should be used in the valuation of financial assets. Those in favour of fair value, who include executives and accountants in the US, say that it provides a transparency vital to investors.
Friday, March 5, 2010
CMSA Asks Policymakers to Move with Care on Reform (CRE Direct; CMSA cited and quoted)
The Commercial Mortgage Securities Association is cautioning policymakers to tread carefully when developing regulatory and policy reforms so they don't impede a recovery in commercial real estate lending. The trade group is distributing what it terms a "Framework for Recovery" for the commercial real estate sector to policymakers who are deliberating legislative agendas. It spells out the issues facing the property and lending markets and outlines the unique structure of CMBS and how vital it is for any recovery. "Policy initiatives must provide the market with certainty and confidence in order to facilitate private lending and investing that is critical to a commercial real estate recovery," said Brendan T. Reilly, senior vice president of government relations for the CMSA.
RBS Seen Bringing $500Mln Conduit to Market in Month (CRE Direct)
RBS is getting closer to bringing a genuine CMBS conduit transaction to market - the first in more than a year. The buzz is that the investment bank could launch a deal with some $500 million of recently originated fixed-rate mortgages, some contributed by Natixis, within a month or so. And it's not expected to rely on the federal government's Term Asset-Backed Securities Loan Facility, or TALF program. Only one CMBS transaction has so far relied on TALF, which provides low-cost financing for investors to acquire AAA bonds. And in that case, investors had requested only $72.2 million of financing in order to buy $85 million of bonds from a $400 million deal issued for Developers Diversified Realty Corp. TALF brings with it a number of restrictions and requirements, such as limiting loans to five-year terms and requiring an operating adviser charged with protecting the Federal Reserve's position as lender on bonds.
Treasury Official: No Bank Viewed As Too Big To Fail (Dow Jones)
By Michael R. Crittenden and Matthias Rieker
There is no U.S. government guarantee to protect the largest financial firms, a Treasury Department official said Thursday, as a congressional watchdog criticized the $45 billion in government aid provided to Citigroup Inc. Herbert Allison, who oversees the Treasury's $700 billion financial rescue plan, disagreed with members of a congressional oversight panel that some financial firms benefit from the assumption that the government would step in to prevent their failure. "There is no too-big-to-fail guarantee on the part of the U.S. government," Allison said.
Wednesday, March 3, 2010
Builders Get Back in Game: Construction of Multifamily Units Expected to Soar in 2010 (Wall Street Journal)
In St. Petersburg, Fla., close by Tropicana Field, an unusual structure is emerging from a construction site: a rental apartment building. The work in progress on the Fusion 1560, a 325-unit upscale project in one of the states hit hardest by the housing crisis, is a sign that developers of multifamily housing are tiptoeing back into the business. This year, real-estate investment trusts, or REITs, are expected to start close to $1 billion in new multifamily projects, according to real-estate research firm Green Street Advisors. While that still is less than average, it is a significant increase over the $100 million of development starts in 2009 … But operators are betting that limited new supply, combined with an improving economy, will lead to ideal market conditions nationwide starting in 2011 or 2012. From then until 2015, "apartment REITs may generate the best property net operating income growth that they've seen in a very long time, maybe ever," said Haendel St. Juste, a REIT analyst with Keefe, Bruyette & Woods Inc.
General Growth sets date (various newswires)
Bankrupt US shopping centre owner, General Growth Properties, is taking time to reorganise its position. It has received a $US10 billion ($A11 billion) takeover bid from Simon Property Group, as well as a $US2.63 billion financing offer from Brookfield Asset Management. General Growth said that it plans to produce a restructuring plan by 5 October 2010.
Is Vornado Considering Bid for General Growth? (New York Times’ DealBook)
Is the Vornado Realty Trust planning to throw its hat into the crowded ring for a piece of General Growth Properties? According to The New York Post, Vornado, is considering a bid for all or part of the bankrupt mall operator. The report comes after General Growth announced a plan last week to split into two companies, with Brookfield Asset Management as a major investor. The reorganization plan was a move to fend off an unsolicited $10 billion takeover offer from the Simon Property Group. While it would leave General Growth independent upon exiting Chapter 11 protection, it would make Brookfield, of Canada, one of its largest equity holders.
A Florida Dream Deferred (Wall Street Journal)
The exuberance in the commercial real-estate market during the height of the boom was exemplified by the willingness of Wall Street to sell and investors to buy securities backed by highly speculative commercial mortgages. Most commercial mortgage-backed securities were backed by office buildings, stores and hotels that had cash flow so investors in the bonds could see how they actually would be repaid. But some developers were able to issue CMBS to finance land acquisitions and other speculative developments with no immediate cash flow. Investors still bought on the hope that the developers would be able to deliver on their dreams.
Tuesday, March 2, 2010
Sen Shelby counters on financial consumer watchdog (Reuters)
WASHINGTON- A senior Republican U.S. senator has made at least two counter-offers to Democrats on creating a new government watchdog for financial consumers, Reuters learned on Monday from aides and documents. Senator Richard Shelby proposed making the watchdog a division of the Federal Deposit Insurance Corp, with some rule-writing power and a director who is appointed by the president and confirmed by the Senate, documents showed. Shelby, the top Republican on the Senate Banking Committee, also has proposed setting up a three-member consumer protection council, said a congressional aide. Both offers show that negotiations between Shelby and Senator Christopher Dodd, the committee's Democratic chairman, on a bipartisan financial regulation reform bill are in full swing, but still have some ground to cover.
Rush of Deals Before TALF Ends (Wall Street Journal)
NEW YORK -- As the final deadline to get low-cost loans from the Federal Reserve nears, issuers of consumer loan-backed deals are swooping in with fresh deals. Nearly $6 billion in asset-backed bonds will be sold this week, just before the March 4 cut-off date for investors to procure non-recourse loans through the central bank's Term Asset-Backed Securities Loon Facility, or TALF. Last month, under $4 billion in TALF-eligible deals were sold. The bulk of new securities up for sale this time round are backed by collateral that is considered "off-the-run"-- including insurance receivables and floorplan loans -- rather than more mainstream bonds backed by auto loans and credit-card debt, which form the bulk of this market.
FDIC to grease [residential] mortgage market with $1.8 bln deal (Reuters)
The U.S. Federal Deposit Insurance Corp is planning to sell $1.8 billion of guaranteed asset-backed debt, according to IFR, in what may be a step toward restoring confidence in securities closely tied to the financial meltdown. The debt will be backed by residential mortgage assets of failed banks seized by the FDIC, market sources said. The two-part deal is expected to sell this week via Barclays Capital, said IFR, a Thomson Reuters service. The move has been anticipated by investors and dealers for months as the FDIC piles up loans from banks failing at an alarming rate. The plan calls up memories of the savings and loan crisis of the early 1990s when the federal government created the Resolution Trust Corp to dispose of assets.
Friday, February, 26, 2010
Commercial Mortgage Alert – Grapevine (Commercial Mortgage Alert; CMSA cited)
The regulatory-reform bill expected to be introduced in the next week or so by Senate Banking Committee chairman Christopher Dodd (D-Conn.) would require lenders to retain stakes in loans they originate for securitization. The Commercial Mortgage Securities Association wants the measure to reflect revisions made by the House before it adopted companion legislation in December. One CMSA backed provision in the final House bill would require lenders to retain a 5% stake, down from 10%. The House legislation also allows CMBS lenders to fulfill the requirement by selling stakes to B-piece buyers.
'SF’ Suffix for Bond Ratings Closer (Commercial Mortgage Alert; CMSA cited)
A separate rating designation for structured bonds — a step many investors fear amounts to a “scarlet letter” for such securities — is moving closer to implementation. S&P and Fitch each said last week that they will add an “SF” suffix to their ratings on structured-finance products issued around the world by September. Moody’s made the same announcement four months ago, with a possible midyear implementation. “I don’t see how this could be good,” said one commercial MBS trader. “It’s either neutral or bad.” The designation could cause logistical problems and hinder trading, according to Rick Jones, a partner in the real estate finance practice at Dechert. For example, he said, pension funds that are required to buy bonds with certain ratings may shy away from bonds with the suffix. “For many it won’t matter,” Jones said. “But I guarantee you that some lawyer is going to tell some entity that the ‘SF’ makes a difference.” The regulation, coming in the wake of the financial crisis, is intended to warn inexperienced investors away from complex instruments. U.S. traders and investors have scoffed at the idea as unnecessary. The Commercial Mortgage Securities Association has strongly opposed differentiations between various types of bond ratings, saying that it would create confusion and unnecessary work for investors.
Geithner to Trade Groups: 'Strong' Regulatory Reform Coming Soon (Fox Business)
The Obama Administration stepped up its efforts Thursday to win passage of financial regulation reform legislation this year, with meetings with top trade association officials and new statements on key reform proposals. In a meeting with executives from eight financial industry and business trade groups, Treasury Secretary Timothy Geithner said the Administration is “throwing its full weight” behind a “strong” reform bill and is pushing for final passage in Congress “soon,” according to two participants. Geithner told association representatives that “the administration would not give up, whether a bill is passed now or later – (it) will not stop fighting” for regulation reform, one participant said. The meeting came as critical negotiations on reform legislation continued at the Senate Banking Committee. Sources said its chairman, Sen. Christopher Dodd (D-CT), and the lead Republican negotiator, Sen. Bob Corker (R-TN), were finalizing details of a reform plan they will introduce as early as Monday. The House passed its reform legislation in December. In a statement about the meeting with trade association executives, a Treasury spokesman said Geithner “reiterated the Administration’s determination to get strong financial reform done soon and done right. He noted that passing a financial reform bill in the near term will create certainty for consumers, businesses and markets -- certainty that is essential to laying a firm foundation for sustainable economic growth.” Geithner met with Rob Nichols, president of the Financial Services Forum; Steve Bartlett, president and CEO of the Financial Services Roundtable; Bruce Josten, executive vice president of the U.S. Chamber of Commerce; Doug Lowenstein, president of the Private Equity Council; Ed Yingling, president and CEO of the American Bankers Association; Cam Fine, president of the Independent Community Bankers Association; Ken Bentsen, executive vice president of SIFMA, which represents Wall Street firms, and Roger Hollingsworth, executive vice president of the Managed Funds Association, which represents hedge funds.
Wednesday, February 24, 2010
Brookfield Preps a Bid for GGP (Associated Press)
Canadian property manager Brookfield Asset Management Inc. is preparing to bid for a large slice of General Growth Properties Inc. It's an effort to block rival Simon Property Group Inc. from acquiring the giant shopping mall operator. Simon made an unsolicited $10 billion offer for General Growth last week, but was rebuffed. General Growth's shares soared as investors speculated another suitor would make a higher bid. Brookfield's offer would enable General Growth to exit Chapter 11 bankruptcy protection with Brookfield as its largest shareholder. Shares in General Growth added 21 cents to $12.97 Tuesday. Shares in Simon, which is based in Indianapolis, slipped 73 cents to $77.91, while Brookfield shares dipped 27 cents to $22.84.
Simon Says To Negotiate
Standoff Is One of Many In the Takeover Battle For General Growth
Simon Property Group Inc. executives are peeved that General Growth Properties is in advanced talks with another suitor but still hadn't agreed on terms for talks with Simon. The standoff is just one of many in the increasingly nasty takeover battle for General Growth, which is seeking to exit from Chapter 11 bankruptcy protection this year. Shopping-mall giant Simon has publicly offered $10 billion to pay rival General Growth's unsecured debts and buy its equity. General Growth said the offer was "insufficient" and instead invited Simon to submit its bid as part of General Growth's planned process to solicit several offers to finance or acquire the company. Trouble is, Simon doesn't like General Growth's proposed nondisclosure agreement because it would prohibit Simon from talking to potential partners for its bid. Another suitor, Brookfield Asset Management Inc., already has lined up financial backers for its offer. General Growth doesn't intend to preclude bidders from talking to financial backers, say people familiar with the matter. Rather, it wants to prohibit bidders from co-opting other commercial-property owners to join their bid, thereby shrinking the pool of prospective bidders. Simon and General Growth may soon reach an accord after having met on Monday with the bankruptcy judge.
Wyden-Gregg Bill Would End Tax-Exempts (Bond Buyer)
New tax reform legislation unveiled Tuesday by Sens. Ron Wyden, D-Ore., and Judd Gregg, R-N.H., would eliminate tax-exempt bonds beginning in 2011, change the tax exemption for state and local bonds to a tax credit, and prohibit the advance refunding of bonds. Market participants immediately announced their staunch opposition to the bill — whose sponsors said it is modeled after “the successful” Tax Reform Act of 1986 — and said it’s unlikely such a drastic overhaul of the municipal market would become law.
White House in New Push for Changes on Wall St. (Washington Post)
The Obama administration redoubled its efforts on Tuesday to overhaul the nation’s financial regulations, saying it would not back down from its efforts to restrict the trading activities of banks and to create a consumer agency to regulate financial products. In an attempt to thwart fierce lobbying against those measures, among others, the Treasury secretary, Timothy F. Geithner, summoned leaders of the United States Chamber of Commerce, the American Bankers Association, the Financial Services Forum and other groups to a meeting on Thursday to urge them not to obstruct the legislative effort. The chairman of the Senate Banking Committee, Christopher J. Dodd, who is drafting a new version of the regulatory overhaul, met again on Tuesday with Senator Bob Corker, Republican of Tennessee, in the hope of arriving at a bipartisan measure.
Senators, finally, near an attractive deal on financial regulation (Washington Post - Column)
By Steven Pearlstein
It's been a year and a half since the collapse of Lehman Brothers, and you have to wonder how big a financial crisis we have to go through before we get the new regulatory apparatus in place to make sure it doesn't happen again. There are many parties to thank for this stalemate: Liberal Democrats who insist that the only solution is to micromanage the financial services industry from Washington. Conservative Republicans who can't accept that their deregulation went too far and can't bear the thought of handing a legislative victory to President Obama. A financial services industry that says it supports regulatory reform in general but can't agree to any specific changes. And regulators, in denial about their own failures, who remain determined to preserve their power and influence.
Wednesday, February 17, 2010
Simon Makes GGP Hot Property (WSJ’s Heard on the Street – Commentary)
It was easy to develop bad habits at the mall last decade. Those of General Growth Properties took it into bankruptcy. Now it is time for more measured choices. Rival mall-operator Simon Property on Tuesday offered a package worth about $10 billion, mostly in cash, to lift GGP out of bankruptcy. The deal would make creditors whole on all $7 billion of unsecured debt and pay shareholders about $3 billion, or $9 a share. But even after a torrid ride in recent years, GGP investors want more. The stock leapt 28% to $12.02 after Simon bid below Friday's $9.40 close. Who would make a sweeter deal? Simon, with the strongest balance sheet among the big real-estate investment trusts, has firepower. Even a smaller rival could probably find a financial backer to bid for GGP's prime assets.
Hudson Pacific To Raise $265M In IPO (Reuters)
NEW YORK, Feb 16 (Reuters) - Hudson Pacific Properties Inc, which plans to qualify as a real estate investment trust by the end of the year, filed for an initial public offering of up to $264.5 million on Tuesday. Los Angeles-based Hudson Pacific owns and operates office properties in Northern and Southern California, including Los Angeles, Orange County, San Diego, San Francisco, Silicon Valley and the East Bay. The company said in a regulatory filing that it is focusing its investment strategy on properties in growth markets and on underperforming properties. After the IPO and formation transactions, Hudson Pacific said, the company will own eight properties totaling 2 million square feet. It said it will use proceeds from the offering to pay off mortgages and acquire interests in the First Financial, Tierrasanta and Del Amo Office properties. The underwriters are led by Bank of America Merrill Lynch, Barclays Capital and Morgan Stanley. The company plans to list on the New York Stock Exchange under the symbol "HPP.N."
Top Blogs For and About Hedge Funds (WSJ.com’s Company Research)
Whether you're running your own hedge fund or looking to work at someone else's, it can help to know the latest industry intelligence and rumors, as well as who's investing where. These four blogs offer the best tailored hedge-fund news, advice and gossip.
Tuesday, February 16, 2010
New TRX Index Key to Restarting CMBS Lending (Structured Finance News)
A new total return swap (TRX) index based on three new CMBS deals could provide a mechanism for loan originators to hedge loans, and would also attract investors, NewOak Capital said. The new index might be just the thing that pushes certain CMBS players to move forward with loan origination. "Inability to hedge loans while aggregating a pool large enough for securitization is one of the biggest obstacles preventing restarting of conduit lending for commercial real estate properties,” said Malay Bansal, head of portfolio management and advisory for commercial real estate and CMBS at NewOak Capital. The Lehman Brothers and Bank of America CMBS indices that worked in the past are no longer appropriate for hedging, especially for new origination loans. Bansal explained that spreads on new bonds with newly underwritten loans cannot be expected to move in tandem with spreads on old bonds, which makes the old bonds or indices unusable as a hedge for newly originated better quality loans. “Originators want deals with new collateral so they can hedge, and new deals require originators to originate new loans,” he said. [Additional opinion from Mr. Bansal on CMBS lending is also available].
GGP + SPE = Ugh (REFI – OpEd)
By Sandy Vergano and James T. Freel, Jr.
In the wake of General Growth Properties' (GGP) recent emergence from bankruptcy, many industry participants are still trying to figure out exactly what happened and whether the outcome was a net positive or negative for one of the fundamental building blocks of the CMBS architecture ¬ the special purpose entity (SPE). While most observers can take some comfort in the fact that the worst-case scenario ¬ substantive consolidation of the parent and its subsidiaries ¬ was avoided, the broader lessons for lenders and CMBS investors looking to reenter the market are murky at best. So far, several responses have been proposed to help shore up the SPE structure.
Rising values reignite interest in mortgage-backed debt (Financial Times)
Bonds secured on buildings that were packaged and sold during the boom – once among the most toxic of assets – have staged a recovery that could see such sources of debt open up again for cash-strapped property owners. Much commercial mortgage-backed debt was untradeable during the worst parts of the crash last year due to fears that these complicated structures could be heading for default, and lengthy battles between the holders to extract cash. The worst of these potential problems have been alleviated by the recent surge in underlying property values that is restoring the credit quality of many bonds to an extent that no one could have predicted. The indiscriminate sell-off is over. By last month, spreads being offered on the senior debt on some of the better-quality properties had narrowed to the tightest range since the crash began.
Thursday, February 11, 2010
Trade Group [CMSA] Backs Dugan Stand (American Banker; CMSA cited, Patrick Sargent quoted)
A securitization trade group Wednesday applauded recent remarks by Comptroller of the Currency John Dugan calling into question "skin-in-the-game" risk-retention proposals. In a Feb. 2 speech, Dugan said that, though he agrees with the intent of legislative proposals to force originators to retain a portion of the risk exposure on their balance sheets when the assets are securitized, this "is an imprecise" way to improve underwriting and could drive players away from the securitization market.
CMSA Supports Comptroller's Ideas About Securitization (GlobeSt.com; CMSA cited and quoted)
The Commercial Mortgage Securities Association is pointing to recent comments made by the Comptroller of the Currency, John Dugan, regarding the revival of the securitization markets. Some of Dugan's thoughts--namely that if the government is not careful certain accounting and regulatory standards may limit credit--have earned the organization's support. “With the number of key distinctions between CMBS and other asset-backed securities, we support OCC Comptroller Dugan in recognizing the prudence required when fashioning broad securitization-related regulatory reforms,” says Patrick C. Sargent, president of CMSA.
Concern Aired Over Banks’ Real Estate Loans (New York Times; CMSA cited)
By Sewell Chan, New York Times, Wednesday, Feb. 10, 2010
A huge wave of mortgage failures on commercial real estate could hit next year, causing banks to lose as much as $300 billion, imperiling lending for small businesses and hindering the economic recovery, a Congressional panel is warning. In a report to be released on Thursday, the Congressional Oversight Panel, which is responsible for reviewing the Treasury’s $700 billion bailout program, said commercial loan losses could jeopardize the stability of many banks, particularly the nation’s midsize and smaller banks, contributing to prolonged weakness throughout the economy.
U.S. Watchdog: Bailout Funds Must Be Used to Help Commercial Real Estate (Fox Business)
A government watchdog panel called on the Treasury Department and bank regulators to tackle continuing problems in commercial real estate more aggressively or risk jeopardizing recovery in the economic and financial systems. In a monthly report to Congress, the Congressional Oversight Panel for the $700 billion TARP bailout program said that it fears a “second wave” of problems for firms that, “even if not as large as the first, can have an outsize effect on a banking sector weakened by both the current crisis and by the economy remaining in a severe recession….The risks on the horizon could open a way to undoing what the TARP has accomplished.”
Wednesday, February 10, 2010
In Pennsylvania, Hope for CMBS (Wall Street Journal)
There is a glimmer of hope for the credit-starved commercial-property industry in an unlikely place: an office park in the Pittsburgh suburb of Cranberry, Pa. The owner of the Keystone Summit Corporate Park, private-equity firm Keystone Property Group, recently refinanced the building for $53.5 million, including a $41.5 million first mortgage from Deutsche Bank AG and a $12 million junior loan from Pembrook Capital. What makes this deal stand out is the plan Deutsche Bank has for the first mortgage. The bank made the $41.5 million loan with an intention of selling it as part of a new commercial-mortgage-backed security, or CMBS, offering that also would include assets from other borrowers, according to Matthew Sigel, Keystone's chief investment officer. The deal, expected to close in the second quarter, would mark the first multiple-borrower CMBS offering in about two years. The last three new CMBS deals were all backed by assets owned by a single borrower. A Deutsche Bank spokesman declined to comment. The return of the multiple-borrower CMBS offerings would be an important source of credit to the thousands of property developers and owners who will need to refinance debt in the next couple of years. —Lingling Wei
Apollo predicts ‘bonanza’ in commercial property (Financial Times)
Leon Black, founder of Apollo Management, has predicted that an impending crisis in commercial real estate will provide a “bonanza” of investment opportunities for distressed debt investors with money to spend. As about $2,000bn of commercial real estate debt falls due in the next few years, Mr Black said he expected banks and insurers to face increasing pressure from politicians and regulators to sell off some of their property loans. British Land portfolio value bounces - Feb-09UK commercial property recovery to hold up - Dec-29Pensions pile into UK property - Feb-07European commercial property rebounds - Jan-17“A lot of the sources of capital [for commercial real estate] have failed,” said Mr Black, speaking at the Super Return private equity conference in Berlin. “So if you have capital there are things you will be able to pick off.”
Fed Audits Banks That Participated In TALF –Sources (Dow Jones)
The Federal Reserve is auditing banks that participated in its program to rejuvenate the consumer-loan-backed market, industry participants say. "They are auditing everybody," said the head of the asset-backed securities syndicate at a primary dealer who declined to be named. It wasn't immediately clear whether the audits were routine reviews of participants or something more. The Fed didn't immediately return calls for comment. The central bank set up the Term Asset-Backed Securities Loan Facility, or TALF, program in March, 2009. Through the program, it provided cheap non-recourse loans to investors to purchase newly created bonds backed by auto and student loans and credit card debt. The Fed then expanded the program to include new and legacy commercial mortgage-backed securities. The consumer-loan-backed portion of TALF is due to end next month, and the commercial mortgage-backed securities portion lasts until June.
Tuesday, February 9, 2010
Commercial Real Estate Lenders Looking to Rebuild Portfolios (DSNews)
The distressed commercial real estate market has made it difficult for potential property owners and opportunistic investors to secure funding for new deals, as widespread losses on such assets have led banks to shy away from extending credit in recent months. But according to new data from Jones Lang LaSalle, that tide appears to have turned, with a growing number of lenders to the commercial real estate sector anticipating an increase in loan production this year. Forty-three percent of respondents to Jones Lang LaSalle’s annual survey expect their loan production to range from $2 to $4 billion in 2010-a number that is more than double the 21 percent that reported sourcing in this range for 2009. Showing even more future optimism, 15.2 percent predict they will lend more than $4 billion this year, and nearly 70 percent of respondents say their loan production will ramp up to $2 to $4 billion in 2011.
FASB member pushes transparency with financial statements (Jacksonville Business Times)
Risky behavior on the part of some banks led to financial turmoil in the last couple of years. But it wasn’t just the risky behavior that caused the problems. It was also due to the fact that financial institutions were able to hide the risks from investors and regulators. So Thomas Linsmeier is trying to fix that. Linsmeier, who visited the University of North Florida today for a talk at its “International Business Week,” is one of five members of the Financial Accounting Standards Board, the organization that sets accounting standards for corporations. “The Financial Accounting Standards Board is making every effort to evaluate the role financial reporting had” in the financial crisis, Lismeier said in an interview.
GTP To Launch Cell Tower Securitization (REFI)
Global Tower Partners is issuing $250 million in five-year commercial mortgage backed securities. The deal is 80% backed by mortgages on 1,351 wireless communication towers, as well as equity pledges by the issuer, according to a presale report from Fitch Ratings. The transaction, Global Tower Series 2010-1, has two tranches: $200 million of A- rated bonds and $50 million of BB- rated bonds, which are slated to price mid-week
Friday, February 5, 2010
Commercial Mortgage Industry Seeks Skin in the Game Option (Housing Wire; Lisa Pendergast quoted; CMSA cited)
The commercial mortgage securitization industry is joining the call for clearer regulation establishing risk retention among originators or securitizers before assets are sold on to investors. The Comptroller of the Currency John Dugan this week urged reform of underwriting standards rather than “skin-in-the game” risk retention proposals … The CMSA, in an e-mailed statement Thursday, supported Dugan’s recommendation of a “skin-in-the-game” alternative: “Over the past year, CMSA has been fully engaged in efforts urging policymakers to ensure that the final regulatory reform package does not negatively impact commercial real estate but, rather, is customized to reflect the unique nature of the CMBS market, which utilizes a third-party investor who purchases the first-loss position and re-underwrites all loans during the pre-issuance period.” … Housing Wire previously sat down with Lisa Pendergast, incoming president of the Commercial Mortgage Securities Association who, in the January magazine issue, said FAS 166 and 167 could “stop any recovery in the securitization markets in its tracks.” Pendergast said that although risk retention proposals out there aim to enforce sound underwriting practices, a clear distinction must be drawn among asset classes within securitization.
Industry Ponders, Waits as FDIC Eyes Plan to Securitize Seized Assets (GlobeSt.com; Pat Sargent quoted, CMSA cited)
Talk has revived that the Federal Deposit Insurance Corp. is putting in place a plan to securitize assets from the failed banks that it currently holds on its books. Last October, the agency indicated that such a plan was under consideration; more recently similar comments have been made. In Washington, such comments are considered one step away from official announcements. Indeed, the question for many has become not if but when … Whatever price fluctuations are introduced would be more than mitigated by a strong sense of valuations that the market would receive by a FDIC securitization program, Patrick Sargent, a partner in the Dallas offices of Andrews Kurth LLP, and president of the Commercial Mortgage Securities Association, tells GlobeSt.com. FDIC securitizing its seized assets “will very likely bring much-needed stability and consistency to valuations and confidence from sidelined investors who are waiting to get back in the market,” he says. “The FDIC has a lot of product, which is unfortunate for the system, but it’s important to get really close to valuations that people will acknowledge as accurate. We’re seeing widely varying appraisal amounts. We’ve got to get ‘price discovery’ in order to find out where valuations really are. Once people are comfortable with that, there are many investors on the sidelines waiting for what they perceive to be the bottom and valuations that they can justify.”
Freddie Mac Eyes Launching Mezzanine-Lending Program (Commercial Real Estate Direct)
Freddie Mac is developing a program to facilitate the placement of mezzanine loans on properties that it finances. The agency in 2007 had launched a program, with CWCapital, that was to provide second-mortgage financing behind a Freddie first mortgage, allowing property owners to borrow up to 85 percent of a property's value. But the agency originated very few loans through the program. Freddie will not rely on a single lender partner with its latest program. Instead, it is in the process of identifying financing partners that would fund the mezzanine loans. Because of the risk that its mezzanine-lending partners could ultimately take over properties it lends against, the agency has to be comfortable with their ability to manage and operate collateral it lends against. The program will be designed to allow owners to borrow up to roughly 85 percent of their property's value.
Commercial property loans to hit small banks-Moody's (Reuters)
Smaller-sized U.S. banks will be hardest hit by their exposure to commercial real estate loans, and many of those banks will collapse, Moody's Investors Service said in a report released on Thursday. A large number of smaller-sized banks, which are not rated by Moody's, make up only 15 percent of U.S. bank system assets but carry 50 percent of commercial real estate loans outstanding, and will struggle under the weight of that exposure, Moody's said. While the cost of small bank failures "will inevitably be borne by the entire banking system," they are not likely to trigger more ratings downgrades beyond what has already been done, Moody's said. Moody's estimates that larger, rated U.S. banks hold 50 percent of total commercial real estate loans and will incur losses from those loans of $120 billion from 2008 through 2011. The amount represents a loss rate of about 17 percent on the banks' year-end 2007 commercial real estate loan balances.
Thursday, February 4, 2010
Optimism Trumps Gloom at MBA Real Estate Finance Conference in Glitter City (CoStar Group)
Mortgage Bankers Release Reports on Loan Maturities and Volumes, Press for Extension of TALF
More than 2,000 commercial and multifamily real estate professionals attended the Mortgage Bankers Association's four-day Commercial Real Estate Finance/Multifamily Housing Conference, which wraps up Thursday in Las Vegas. Despite a recession and slow recovery that has stunted commercial and multifamily transaction activity by 84% since 2007, conference attendance is higher than projected and better than last year, with attendees "looking forward to 2010 being a better year," Rob Story, Jr. MBA chairman, told reporters Tuesday.
End of TALF Means Bond Spreads Five-Fold Wider: Credit Markets (Bloomberg)
The end of a Federal Reserve program that helped unlock credit markets is spurring sales of asset- backed bonds with relative yields five times wider than on debt secured by car loans. The expiration of the Fed’s Term Asset-Backed Securities Loan Facility is driving companies to sell bonds tied to loans that would otherwise require higher yields. Borrowers are offering bonds backed by subprime auto loans, mortgage-servicing payments and assets that have proved hard to sell after the worst credit seizure since the Great Depression … Investors have a deadline of today for taking out loans through TALF this month. The program, which provides loans to investors buying the debt, began in March 2009 and expires March 31.
Global accounting rules may face big delays (Reuters)
The world's top accountants are warning that plans by the United States to move to global accounting standards are vulnerable to major delays and the process could get very politicized. In interviews during last week's World Economic Forum in Davos, top executives from three of the Big Four accounting firms said discussions over a roadmap to move U.S. companies to international standards were reaching a crucial point. The U.S. Securities and Exchange Commission has been reviewing public comments on a roadmap that would allow U.S. companies to use International Financial Reporting Standards (IFRS) by 2014. However, it is unclear whether SEC Chairman Mary Schapiro favors the timeline as it was drawn up under her predecessor Christopher Cox. SEC officials said late last year that they are likely to consider further action early this year. The SEC wasn't immediately available for comment on Wednesday.
Threatened Legal Action Over NYC Rent Control Likely to Roil CMBS Market (CoStar Group)
Hundreds of Millions of Dollars and Multifamily Value Strategies At Risk by NY's Plans To Sue Major Landlord
Another half a billion dollars in CMBS debt looks even weaker this week after New York Attorney General Andrew M. Cuomo announced his intent to sue Vantage Properties LLC, a major New York City multifamily landlord. Cuomo sent a five-day notice letter to Neil Rubler, the president of Vantage Properties, notifying the company of the Attorney General's intent to commence litigation against the firm. The action is an attempt "to stop [Vantage] from harassing tenants in rent-regulated apartments and to obtain monetary damages for tenants who have been victimized," the Attorney General's office said in a prepared release. Since March 2006, Vantage has purchased more than 125 buildings containing more than 9,500 apartments throughout Queens, Harlem, and Upper Manhattan - almost all of which are rent-regulated. The Attorney General's threatened legal action alleges that Vantage is pursuing a strategy to generate turnover among long-term, rent-regulated tenants, and impose significant rent increases on new tenants in order to increase profits.
Wednesday, February 3, 2010
Hotels' Distress Lead CMBS Delinquencies To Record Level (Dow Jones)
By Prabha Natarajan
Hotels, which for more than a year have been struggling with a drastic drop in bookings, now lead all other classes of commercial real estate in delinquencies, data provider Trepp said Tuesday. Payments on loans to hotel properties that were 30 days late or more hit a high of 15.32% in January. That matches Fitch Ratings' estimates that nearly 15% of the $51 billion in hotel loans that are securitized into commercial mortgage bonds will turn delinquent over the course of this year.
CRE Distressed Debt Fund Formed in Atlanta Formed (DS News)
Atlanta-based Regent Partners LLC and TriGate Capital have joined forces to form a $400 million fund to invest in commercial real estate. It’s just one more sign that the downturn in the sector has created a buyer’s market of incredible bargains. According to the firms, the Regent-TriGate Property Fund I will focus on the recapitalization of real estate assets primarily in Atlanta, as well as other markets in the Southeast, that require both capital and management expertise. As DSNews.com reported last week, a congressional oversight panel recently headed to Atlanta to hold a field hearing on the potential reach of commercial real estate troubles. Atlanta was chosen as the destination because that market has been hit particularly hard and many experts believe Atlanta’s experience could eventually stretch to other parts of the country.
Mortgage Bankers Stepping up Financing for Commercial Real Estate: MBA (DS News)
Contrary to popular belief, the Mortgage Bankers Association (MBA) says financing for new commercial and multifamily mortgages is on the rise. According to a quarterly survey released by MBA Tuesday at its Commercial Real Estate Finance convention in Las Vegas, commercial and multifamily mortgage loan originations were 12 percent higher in the fourth quarter of 2009 than during the same period last year, and 15 percent higher than the third quarter of 2009. “Commercial and multifamily mortgage originations picked up in the fourth quarter, but remain at a low level in absolute terms,” explained Jamie Woodwell, VP of commercial real estate research at MBA. “The trend shows stability coming back to the market, but the pick-up in volumes really indicates just how low origination levels had fallen.”
Tuesday, February 2, 2010
Volcker rule unlikely to move forward in Senate, lawmakers say (Financial Times)
A proposal by former Federal Reserve Chairman Paul Volcker to limit bank’s proprietary trading will be either be dropped or significantly modified in the Senate, lawmakers and staffers told [Financial Times]. Senate Banking Committee ranking member Richard Shelby (R-AL) said he opposes the so-called Volcker rule and the Obama administration’s call to levy a USD 90bn tax on banks. His comments come as House Financial Services Committee Chairman Barney Frank (D-MA) predicted the proposals outlined by President Obama could be law within six months. Speaking to this news service on Thursday, Shelby said if Democrats push forward with the proposals they risk unraveling much of the bipartisan support already reached regarding the passage of financial regulatory reform in the Senate. Shelby said that the Obama administration risks losing Republican support for the bill if they begin to “politicize” the issue. However, Shelby said he expects to hold a meeting with Banking Committee Chairman Chris Dodd (D-CT) regarding the way forward on regulatory reform in two weeks time. A Democratic banking committee staffer confirmed that the meeting between Dodd and Shelby will be critical as Dodd needs to determine the level of bipartisan agreement and the timing of bringing the bill through committee and on the Senate floor.
Treasury Issues First PPIP Report (Euromoney)
The Department of the Treasury has issued its first quarterly report on its Legacy Securities Private-Public Investment Program. Among the findings: The total market value held by all PPIP fund participating in the program was roughly $3.4 billion as of Dec. 31, nonagency residential mortgage-backed securities accounting for $2.971 billion of the total and the rest in commercial mortgage-backed securities. Among the non-residential RMBS, 42% were prime and 41% were Alt-A loans. CMSA Members: Click here for a PDF copy of The Department of the Treasury’s Quarterly Report on PPIP.
Treasury Official Calls For Reformed Securitization Market (Dow Jones)
The consumer loan-backed market needs to be reformed before investors become more comfortable with it, said a Treasury official on Monday. "We cannot build securitization on old infrastructure," said Michael Barr, assistant secretary for financial institutions, US department of Treasury, speaking at the seventh annual American Securitization Forum's conference, being held at the Gaylord National Hotel in National Harbor, MD. "We need clear rules and transparency." While recognizing the importance of the securitization market in the economy as it eases the flow of credit, he said any "innovation must be governed by rules." What is needed, he said, is a "rational, sustainable model." While the administration has helped restart the securitization market through its program to give investors cheap loans to buy newly created bonds, much remains to be done, Barr said. “We will not have sustainable growth unless we lay a new foundation for the financial system," he said, adding "the system of financial regulations are still unchanged from pre-crisis days."
Congress Worries About Commercial Real Estate (NYTimes' DealBook Blog)
There is growing concern in Congress that the shaky $6.7 trillion commercial real estate market could implode, delivering a major blow to the economic recovery. A bipartisan group of 79 House members led by Representative Paul E. Kanjorski, Democrat of Pennsylvania, and Representative Ken Calvert, Republican of California, sent a letter to the Treasury Department and the Federal Reserve on Monday urging them to take a more active role in keeping the commercial real estate market from turning into a disaster. “The growing bubble in the commercial real estate industry has the potential to infect our economy and slow a recovery,” Mr. Kanjorski said in a statement. “In order to safeguard the businesses operating on Main Street and protect the millions of jobs depending on commercial real estate, the Treasury and the Federal Reserve now must take needed and urgent action to stave off a potentially devastating wave of commercial real estate foreclosures and bank losses,” Mr. Kanjorski said.
Friday, January 29, 2010
CMBS Fund Nearing Final Close (Copyright: Commercial Mortgage Alert)
A joint venture is on track to complete fund raising soon for a fund targeting super-senior commercial MBS. Aqua Investment and BlueGate Partners, both of New York, lined up $37 million of commitments recently. A final close with $40 million of total equity is expected in a few weeks.
The vehicle, Aqua BlueGate CMBS Venture 2, will seek to take advantage of the Federal Reserve’s TALF program. TALF, formally known as the Term Asset-Backed Securities Loan Facility, provides low-cost loans to buyers of eligible super-senior CMBS. With leverage, the vehicle would have more than $200 million of buying power. However, the legacy-bond component of TALF is scheduled to expire on March 31, which leaves only two more monthly rounds of financing. So the operators would have to move fast.
Aqua BlueGate CMBS Fund 2, which shoots for a 12-15% return, has been talking to approved broker-dealers in recent months about gaining access to TALF.
Wealthy individuals and family offices have supplied most of the vehicle’s equity. Aqua and BlueGate will kick in up to $1 million. The joint venture set up its first fund, Aqua BlueGate CMBS Venture 1, last summer. That vehicle’s strategy was to buy supersenior and mezzanine triple-A securities at deep discounts. But a big CMBS rally hindered the plan. “The first strategy was more capital appreciation,” said one investor familiar with the funds. “That play is gone.” Aqua and BlueGate planned to raise $50 million for the vehicle, but stopped soliciting capital after lining up $11 million, all of which has been invested.
Treasury to Address ‘80% Test’ Rule (Copyright: Commercial Mortgage Alert; CMSA cited)
The U.S. Treasury Department plans to address industry criticism about recently issued guidelines aimed at making it easier to modify securitized commercial mortgages. The agency moved in September to ensure that securitization trusts wouldn’t lose their tax-free status if servicers modified loans before defaults occurred. That action was welcomed by the real estate industry, which sought more flexibility to work out distressed mortgages.
But the guidelines for “Remic” trusts included a provision requiring that the market value of the collateral for a modified loan equal at least 80% of the face amount. With property values battered, critics said the 80% test would be impossible to meet in many cases and would have the unintended effect of blocking many modifications. They said it could create a conflict of interest for servicers when a borrower seeks to sell one property collateralizing a portfolio loan. The servicer would be contractually obligated to release the lien on the property, but doing so might eliminate the trust’s tax-free status, which the servicer is obligated to maintain.
The Commercial Mortgage Securities Association and other trade groups urged the Treasury Department to drop the 80% test or apply it only to workouts of future securitizations.
Revived Conduit Shops Offer Similar Terms (Copyright: Commercial Mortgage Alert)
About a half-dozen securitization shops have resumed soliciting borrowers with marketing pitches carrying broadly similar terms, but so far they are having a hard time lining up loans that meet their parameters. Commercial Mortgage Alert obtained conduit-loan terms for five renewed programs — Bank of America, Bridger Commercial Funding, Citigroup, Goldman Sachs
and J.P. Morgan (see chart, page 10, CMA 1/29/10 issue). While terms can vary widely depending on the specific borrower and property, the lenders are generally offering nonrecourse, fixed-rate loans with terms of 5-10 years, coupons of 7-7.75%, maximum loan-to-value ratios of 70%, minimum debtservice-coverage ratios of 1.3 to 1, minimum debt yields of 11-12% and origination fees of 100 bp.
Friday, January 22, 2010
Commercial Mortgage-Backed Debt Sales to Stay Below $15 Billion (Bloomberg)
Sales of commercial mortgage-backed securities will likely remain below $15 billion in 2010 as borrowers struggle with declining property values, according to analysts at Barclays Capital and JPMorgan Chase & Co. Debt sales backed by skyscraper, hotel and shopping mall loans may be as low as $10 billion this year, according to Alan Todd, a JPMorgan analyst in New York. Aaron Bryson, a Barclays Capital analyst also in New York, forecasts more transactions, reaching about $15 billion during the period. The U.S. government has committed to reviving the $700 billion commercial-mortgage backed bond market amid plunging property values and a lending pullback. A record $237 billion of the debt was sold in 2007, compared with $12 billion in 2008 and $1.4 billion last year, according to data compiled by JPMorgan. New issuance isn't likely to pick up until the second half of this year, Todd said. he banks would like to lend Todd said during an interview at the Commercial Mortgage Securities Association annual conference in Washington. There are fewer properties to lend against. Many owners went heavily into debt during the boom years and find it hard to locate properties not already encumbered to lend against, Todd said. The lack of new loans chokes off funding to borrowers with maturing debt. Two-thirds of loans bundled and sold as securities, amounting to $410 billion, may require more cash as property values plummet and underwriting standards tighten, according to Deutsche Bank AG data.
D.C. Is In a Real Estate State Of Mind (Real Estate Finance & Investment)
Sen. Bob Corker (R-Tenn) says that Congress is backing off from threats to pass substantial legislation aimed at regulating the commercial real estate industry. Instead, he sees growing support among elected officials to allow the market to correct itself and to enable the winding down of governmental programs. “I don’t see us doing anything as it relates to commercial real estate,” he said.
Big Banks Also In Big Commercial Mortgage Trouble (The Atlantic)
Yesterday, Federal Deposit Insurance Corporation Chairwoman Sheila Bair gave a speech at the Commercial Mortgage Securities Association Annual Conference. In it, she said a lot of what we already know about Bair's intentions for regulation going forward. But she also summarized some data the FDIC had compiled on the commercial real estate market. One item particularly caught my attention: the big banks' exposure. For some time now, commercial real estate has been characterized as what may be the next shoe to drop. If anything threatens to cause a double-dip recession, it's a widespread deterioration in commercial mortgages. I've written about this several times. Megan's magazine column this month in The Atlantic also addressed the topic. But up to now, most of what I've read and heard about the upcoming commercial real estate doom had been mostly isolated to smaller, regional banks. They were said to hold greater CRE risk than the bigger banks. While bad news for the FDIC's insurance fund, at least it would imply that the big banks might not need another bailout due to commercial mortgages going bad.
CMSA Conference Draws More Than 1,100 (CRENews)
More than 1,100 commercial real estate market participants converged on Washington, D.C., this week to attend the Commercial Mortgage Securities Association's conference. The number of registered attendees at what traditionally has been the trade group's investors' conference was nearly double the 630 that attended the group's New York conference last June, and compares to the roughly 700 who attended last year's investors' conference in South Miami Beach, Fla. The event, "Where Capital and Ideas Meet," included a series of forums geared specifically toward investment-grade CMBS and other debt investors, mortgage servicers, portfolio lenders and agency lenders. They are part of the trade group's effort to attract a broader constituency.
Bair at CMSA: CRE Problems Go Beyond Small Community Banks (National Mortgage News)
All banks and thrifts are having problems with commercial real estate loans, not just small community banks, according to Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair.
"Despite what you may be hearing, CRE credit problems are affecting big and small banks alike," the Federal Deposit Insurance Corp. chairman said in a prepared speech delivered at a Commercial Mortgage Securities Association conference in Washington, D.C. As of Sept. 30, FDIC-insured institutions held $1.3 trillion CRE and multifamily mortgages —nearly 18% of total loans. And $44.8 billion are classified as noncurrent (90-days or more past due or considered uncollectible). Banks and thrifts hold another $500 million in construction and development loans and 15% of these are noncurrent. "The annualized net charge-off rate of 6% on C&D loans in the third quarter significantly exceeds the highest rate of the last crisis, which was about 4%," Bair said. FDIC expects delinquencies and charge-offs will move higher in the coming quarters.
Revival of key US CMBS type seen in 2nd half 2010 (Reuters)
The recovery of the U.S. commercial mortgage bond market is under way, but it may be later this year before dealers can cobble together the kinds of deals that fueled rapid growth for the sector in the past, dealers and market analysts said on Wednesday. The issues comprised of multiple loans underwritten by investment banks are in the early stages of planning, and the first in about two years could be seen in the third or fourth quarter, Christopher Callahan, a managing director with Bank of America Merrill Lynch, told Reuters at a Commercial Mortgage Securities Association meeting. Months ago, doubts lingered about the revival of "conduit" issues because banks could not get inexpensive funding for the deals, and they saw high risks in holding loans as the outlook for commercial real estate remained shaky. While the sector's fundamentals have kept banks skittish, capital markets needed to boost the key economic sector have improved. "I think folks are now starting to commit their balance sheet to lend for securitization purposes," said Callahan, who said Bank of America was "close," adding: "There is a trend for people to start securitizations again."
FDIC's Bair: Expect Higher Commercial Real Estate Charge-Offs (Dow Jones, WSJ.com)
Problems in the U.S. commercial real estate market are expected to continue in the first quarter and are likely to be the cause of more bank failures in the coming year, a top banking regulator said Wednesday. Federal Deposit Insurance Corp. Chairman Sheila Bair said in a speech that regulators expect banks to report higher delinquencies and charge-off rates for commercial real estate properties in the first three months of 2010. Speaking to the Commercial Mortgage Securities Association, Bair said even income-producing properties have seen a decline in credit performance.
Grapevine (Commercial Mortgage Alert)
Attendance was greater than expected at the Commercial Mortgage Securities Association’s annual winter conference in Washington this week. About 1,120 took part, up from the 706 who attended the event in Miami Beach last January.
Bank will again use deferred pay plan (Boston Globe)
Bank of America Corp., the lender that bought Merrill Lynch & Co. last year, plans to use more deferred compensation to pay its investment bankers, chief executive Brian Moynihan said.
“The amount of deferral is going to be consistent with both companies,’’ Moynihan said yesterday. “There will be a heavier deferral of stock, subject to clawbacks.’’ The policy brings investment bankers in line with the company’s traditional approach toward pay, said Moynihan, who became CEO on Jan. 1. Lawmakers, regulators, and President Obama have criticized pay and bonuses awarded by lenders and securities firms after $700 billion of taxpayer money was used to rescue the financial industry. Bank of America’s senior capital markets and investment bankers “are comfortable with the plan,’’ said Moynihan. The capital markets, investment banking, and wealth-management units at the Charlotte, N.C.-based company “performed very well during the quarter,’’ the CEO said … Compensation policies that encouraged risk-taking helped to fuel the rapid growth in credit markets, especially for mortgages and related derivative products, Bair said in a speech at a Commercial Mortgage Securities Association conference in Washington. The FDIC this month proposed punishing banks with risky pay practices by charging higher deposit insurance premiums, as the government seeks to rein in compensation that spurs excessive risk taking.
US commercial mortgage lenders shun loans in need (Reuters)
Dozens of lenders at an industry conference this week said they wanted to increase funding for U.S. commercial real estate, now in a steep downturn due to the lack of credit and poor economy. But the loans they were willing to make weren't the ones that were most needed, leaving many borrowers to struggle, said sources who attended a closed meeting on Tuesday. The lenders, queried on their plans during a Commercial Mortgage Securities Association conference in Washington, had plenty of cash for office, retail and apartment buildings with solid cash flow and low debt. Conversely, lenders were not willing to extend billions of dollars for maturing loans made at the top of the market. "It was the tale of two markets," said an executive at a U.S. insurance company, who heard the discussion. Fresh sources of financing are crucial for the $700 billion market for commercial mortgage bonds secured by loans supported by equity that has vanished over the past two years as revenue and property values plunged. Debt markets have not refinanced much, and traditional portfolio lenders such as insurance companies and banks are loath to touch loans made when underwriting was lax.
FDIC Mulls Change on Setting Premiums (American Banker)
Federal Deposit Insurance Corp. Chairman Sheila Bair said the FDIC may shelve its use of rating agencies in setting insurance premiums for large banks. At a Washington conference Wednesday, Bair also confirmed plans to securitize some failed-bank assets and touted proposed restrictions on private-sector securitizations. Since 2007 the FDIC has used debt ratings along with other risk factors to calculate premiums for banks with assets of more than $10 billion that issue long-term debt. But Bair said that could change amid scrutiny over how private rating agencies performed before the mortgage meltdown. "I'm embarrassed to say our insurance assessments are in part based on long-term debt ratings, and so we are going to be dealing with that and replacing it with something, I think, where we'll be doing our own analysis," she said in a speech to the Commercial Mortgage Securities Association.
Bair urges banks to take losses on commercial loans (Reuters)
Banks must recognize commercial real estate losses - Bair
A top regulator on Wednesday told banks to stop dragging their feet and recognize losses on commercial real estate loans, a sector that is due to deteriorate in the coming quarters and drive bank failures. Sheila Bair, chairman of the Federal Deposit Insurance Corp, said banks should try to modify troubled commercial real estate (CRE) loans, but must recognize losses if such a workout does not maximize value. "The losses need to be recognized," Bair stressed to a conference of the Commercial Mortgage Securities Association. Bair, an activist regulator, has been hailed for her early warnings on the dangers of subprime lending and securitizations. She said on Wednesday that she expects the rates of noncurrent CRE loans to continue to rise "in the coming quarters," and reiterated her belief that the troubles in the sector will increasingly be a driver of bank failures this year.
FDIC chief urges overhaul of bank compensation practices (Bloomberg)
Federal Deposit Insurance Corp. Chairman Sheila Bair urged an overhaul of bank pay practices, saying many companies failed to link compensation and risk management that led to “badly misaligned” incentives. Compensation policies that encouraged risk-taking helped to fuel the rapid growth in credit markets, especially for mortgages and related derivative products, Bair said today in a speech at a Commercial Mortgage Securities Association conference in Washington. “Many plans translated large short-term profits into generous payments with insufficient regard to long-term risks,” Bair said.
Bair Invites CMSA Input on CMBS Revival (Housing Wire)
Federal Deposit Insurance Corp. (FDIC) chairman Sheila Bair addressed several concerns of the commercial mortgage industry Wednesday with statements made at the Commercial Mortgage Securities Association’s (CMSA) annual conference. Bair not only emphasized the need to revive the market for commercial mortgage-backed securities (CMBS) – acknowledging “CMBS is different from residential MBS” – but she also invited the feedback of commercial mortgage industry professionals. CMSA for months has raised alarm over “one-size-fits-all” regulatory reform applied to both CMBS and RMBS. CMSA executive committee member Christopher Hoeffel in October indicated he does not oppose reforms, but urged lawmakers to tailor reforms to address the needs of various asset classes.
CRE Troubles Hurting Big/Small Banks Alike (National Real Estate Investor)
According to Federal Deposit Insurance Corp. Chairman Sheila Bair, troubled commercial real estate loans are hurting both large and small banks alike. Bair also says that CRE mortgage woes are in many ways “even more pronounced” than those in the residential market. Bair made the comments during this afternoon’s speech at the Commercial Mortgage Securities Association’s annual conference in New York. She blamed the CRE troubles on loose underwriting in recent years and called for more reforms in securitization of loans going forward.
FDIC-insured banks now hold the largest share of mortgage debt and their exposure is “at historic highs.” As of September, CRE loans backed by income-producing properties - nonfarm, nonresidential properties or multifamily real estate - totaled $1.3 trillion, or nearly 18% of total loans and leases. Banks and thrifts also held almost $500 billion in construction and development loans.
Bair Says CRE Woes Aren't Confined to Small Banks (DSNews)
For months, analysts and industry experts have assured the markets that the downturn in the commercial real estate (CRE) sector won’t be enough to send the financial system into a second crisis – that it won’t be the dreaded “next shoe to drop” because exposure is, for the most part, isolated to smaller, community banks. But at the Commercial Mortgage Securities Association Annual Conference in Washington, D.C. this week, FDIC Chairman Sheila Bair presented some sobering data that paints a very different picture. “Despite what you may be hearing, CRE credit problems are affecting big and small banks alike,” Bair said. “In fact, CRE noncurrent and charge-off rates are higher at banks with over one billion dollars in assets than at community banks.”
Friday, January 15, 2010
Top CMSA Lobby Priority: US Relief (Commercial Mortgage Alert; CMSA article)
The Commercial Mortgage Securities Association’s top lobbying priority this year is to press Congress and federal agencies to continue to take steps aimed at reviving the commercial mortgage market. The trade group also will push for changes in pending regulatory-reform bills, seek a delay in the enactment of new accounting rules and lobby for revisions in new guidelines on mortgage modifications.
The lobbying agenda will take center stage next week as industry professionals head to Washington for the association’s annual winter conference. The two-day confab kicks off Tuesday at the JW Marriott Hotel. Registrations topped 1,000 yesterday, well above the 706 who turned out for last year’s event, held in Miami Beach.
With the shift to Washington, the association was able to invite scores of U.S. policy makers to drop by to discuss the plethora of regulatory, legislative and accounting reforms facing the commercial real estate market. Sheila Bair, chairman of the FDIC, will speak at a luncheon on Wednesday. Also slated to attend: House minority whip Rep. Eric Cantor, R-Va., and Sen. Bob Corker, R-Tenn., who sits on the Senate Banking Committee. Going forward, the trade group aims to push U.S. policy makers to build on the liquidity programs they put in place over the past year or so, such as the U.S. Treasury Department’s Troubled Asset Relief Program (TARP) and its Public-Private Investment Program (PPIP).
The CMSA is also pressing for a longer-term solution than the Federal Reserve’s TALF program, which provides low-cost loans to buyers of super-senior CMBS and other high-grade structured bonds. The legacy-bond component of TALF, formally called the Term Asset-Backed Securities Loan Facility, expires March 31. The Fed will cease writing loans to buyers of bonds from new issues at midyear.
Many CMBS professionals would like to see TALF extended, especially since only one new issue eligible for the program has been launched so far. But that doesn’t look likely at this point.
Another top lobbying priority is pressing the Senate to adopt key lender-friendly provisions now in companion legislation in the House. For example, the House bill, passed last month, requires lenders to retain a 5% stake in loans they originate. The House originally set a 10% level, but the CMSA and other trade groups successfully lobbied for the lower threshold. They also persuaded lawmakers to let B-piece buyers fulfill the 5% requirement. he CMSA is also urging bank regulators to delay the implementation of higher capital-reserve standards resulting from rules adopted last year by the Financial Accounting Standards Board. The rules, which took effect Jan. 1, will make it harder for CMBS lenders to remove securitized assets from their books.
Rule Makers Remove CMBS Market's Accounting Linchpin (CRE Direct)
By John Covaleski
A new accounting rule that requires B-piece buyers of CMBS loans to record on their balance sheets the entire value of the bonds they handle has taken effect.
The Financial Accounting Standards Board, or FASB, has formally codified its FAS 167 standard, which eliminates qualifying special-purpose entities, or QSPEs, an accounting concept that's been the linchpin for CMBS.
The QSPEs allowed controlling-class investors to buy bonds from transactions without having to book the entire deals on their balance sheets. That in turn has enabled bond issuers to sell, for accounting purposes, the loans that they packaged into CMBS. They otherwise would have to carry the bonds' entire value on their books.
FAS 167, which also sets new reporting rules for the securitization of other types of assets, applies to existing CMBS as well as new issues. An overview of the rule is available on FASB's Web site.
It foists the responsibility to record CMBS bonds' total values on their controlling class investors or other entities that receive significant fees for managing the bonds' performance.
Both those definitions apply to B-piece buyers.
The codified version of FAS 167 is virtually identical to what FASB proposed last summer, stoking widespread fear that CMBS issuance and management would be severely crippled.
The new rule means that a B-piece buyer of a bond consisting of hundreds of millions or billions of dollars worth of loans would have to record the bond's entire value on its balance sheet, even though it may only own a stake worth say 2-3 percent of that value.
"This issue has not changed since last summer. QSPEs are gone," said Tom Barbieri, a partner in the assurance services practice of accounting firm PricewaterhouseCoopers.
FASB, the accounting rule maker for the United States, had been considering reining in CMBS issuers' user of QSPEs ever since the Enron accounting scandal. The credit crisis that began in 2007 heated regulatory interest in the issue this go-round.
The rule technically took effect Jan. 1 for companies that report by calendar years, and the first fiscal year beginning after Nov. 15, 2009, for all other companies.
"For the most part, issuers are in a discovery process to see what's going to have to go on their balance sheets. We have yet to see a lot of discussion of how they will deal with the rule," Barbieri said.
Loopholes could emerge from the rule's later interpretations. Barbieri said there could theoretically be cases in which a servicer's stake in a bond is too small and the performance-based component of its fees too small to consider it a controlling investor.
To be sure, he said those cases would be rare and that the SEC will closely monitor the management of CMBS deals for changes made to sidestep FAS 167.
The rule may also be modified somewhat in negotiations that FASB is having with the International Accounting Standards Board regarding converging their respective rules. FASB has deferred money market funds from having to meet the FAS 167 rules until after the convergence project is completed later this year.
Meanwhile, the rule is expected to be a major and costly accounting headache for CMBS B-piece buyers. Rick Jones, chairman of the Commercial Mortgage Securities Association's political action committee, last summer noted, "It will be extremely expensive to meet these reporting standards and it will not make financial statements more understandable."
The FDIC last month issued its own rule that gives banks a year to phase in their implementation of FAS 167 so they can meet the agency's risk-based capital standards.
Famous D.C. Hotel Falls Into Special Servicing (Mortgage News)
The transfer of large-balance commercial mortgage-backed security (CMBS) loans to special servicing continues to increase as commercial property performance declines, according to Fitch Ratings in the latest edition of its "What's in Special Servicing?" bulletin. An additional $1.2 billion of loans in Fitch-rated CMBS have entered special servicing recently, with a high-profile hotel property in Washington, D.C., among the new entries.
Among the 95 new loans in special servicing is the Renaissance Mayflower Hotel - a $217 million hotel property located in Washington, D.C., that transferred to special servicing on Nov. 6, 2009, for imminent default after the borrower indicated it would no longer be able to cover debt service.
This latest entry is in line with Fitch's expectations that retail and hotel properties will continue seeing the most adverse and immediate effects.
“Additional high-profile hotel properties transferring to special servicing are likely,” says Senior Director Adam Fox.
Also of note is the $3 billion Peter Cooper Village/Stuyvesant Town loan, which became the second-largest loan to officially transfer to special servicing. The 11,227 square-foot New York apartment complex moved over to special servicing on Nov. 6, as expected.
With the November increase, specially serviced loans now total 7.8% of Fitch-rated CMBS.
Tuesday, January 12, 2010
Next Week's CMSA Confab Draws 960 So Far (Commercial Real Estate Direct; CMSA cited)
Attendance at next week's Commercial Mortgage Securities Association conference in Washington, D.C., is slated to be up by 52 percent from the trade group's last get-together. So far, 960 individuals have registered to attend the conference, which will be held Jan. 19 and 20 at Washington's JW Marriott Hotel. That compares with 630 who attended the CMSA's annual convention last June at New York's Waldorf-Astoria, and 711 who made it to last year's investors' conference in South Beach Miami, Fla. For the upcoming event, the trade group had initially reserved a block of rooms at the JW Marriott in Washington, but that sold out in short order. It then reserved blocks at the Marriott at Metro Center, Sofitel and Marriott Renaissance hotels. Each sold out as well. But a number of other Washington hotels still have rooms available. The CMSA will host a series of forums tailored to each of its constituents: lenders, servicers, investors and originators of apartment loans under agency programs. The forums are part of the trade group's efforts to broaden its reach to participants in the commercial mortgage business who don't necessarily rely on securitization.
Large Wall Street bonuses spark talk of new levy on financial industry (LA Times)
WASHINGTON: As Wall Street prepares to pay rich bonuses once again, Obama administration officials are considering a new tax on the financial industry -- a move that could temper resentment over banking's rapid recovery at a time when more than 15 million Americans remain out of work … lawmakers are weighing a new tax on bonuses paid to Wall Street traders and executives. Another proposal would impose new fees on stock transactions -- a tax that would reap the most from large banks, hedge funds and other institutions with huge trading operations.
CRE Recovery 'in Early 2011' (National Mortgage News)
Grubb & Ellis Co. here released its 2010 Real Estate Forecast, indicating that 2010 commercial real estate fundamentals will decline more slowly than in 2009, with most property types reaching bottom near the end of the year and beginning a slow recovery starting in 2011. "The national economy has begun a slow and cautious recovery, but the labor market, which often lags the broader economy, will turn around only gradually with sustained improvement unlikely before the second half of 2010. Because commercial real estate lags the labor market, it still has a ways to go before reaching its own low point," said Bob Bach, senior vice president, chief economist of Grubb & Ellis. "The good news is that the freefall we saw in 2009 is over and the future is more certain, giving owners and users of real estate the confidence to begin making decisions again."
Monday, January 11, 2010
US commercial property attracts new wave of money (Financial Times)
The beleaguered US commercial real estate sector has been attracting a new wave of money from sources including foreign banks, US private equity firms, and a leading Chinese sovereign wealth fund. Market participants warn that the activity represents “bottom-feeding” by opportunistic investors whose strategies could be derailed by rising interest rates. Also, sums are tiny compared with the debts that need refinancing. Nevertheless, the growing interest from investors is a sign of stabilisation, making it less likely that worsening commercial real estate conditions will sink banks and choke off a US recovery.
CMBS investors set for lucky escape (Reuers - Opinion)
It’s the slowest train wreck of the financial crisis. Commercial real estate is still screeching roughly two years after lenders jammed on the brakes – witness the financial woes of Stuyvesant Town and Peter Cooper Village, the giant Manhattan apartment complexes acquired for $5.4 billion in 2006. Yet while regional banks are braced for a damaging impact, mortgage-backed bond investors are betting they’ll escape with just a few scratches. That’s an astonishing turnaround from last year’s panic. The Federal Reserve’s pledge to prop up the market through a special lending facility helped, as did other measures that helped the financial world avoid total meltdown.
Financial regulatory reform has its benefits -- and its limits (Washington Post – Editorial)
SEN. CHRIS DODD'S decision not to seek reelection injects a new element of uncertainty into the congressional negotiations over financial regulatory reform. The House has passed a comprehensive measure, so the next move is up to the Senate. As chairman of the Banking Committee, Mr. Dodd unveiled a 1,000-plus-page bill widely seen as a bid to get back in the good graces of his Connecticut electorate. The ranking Republican on the committee, Sen. Richard C. Shelby (Ala.) rejected it, and at last check the pieces were tied up in two-member bipartisan working groups. Perhaps Mr. Dodd's retreat from politics may make a compromise more feasible, but that is just a hope. This is still an election year. There are almost as many points of contention in the financial regulatory debate as there are in the health-care debate -- and the issues cut across party lines. Should there be a strong consumer protection agency to rein in subprime mortgages and other toxic "products," or would that stifle innovation and duplicate state regulation? Should the Federal Reserve retain primary regulatory responsibility over bank holding companies, or should all such power be concentrated in a single agency? Who is best positioned to monitor systemic risk? And so on.
Friday, January 8, 2010
Rents Signal Rise of D.C., Fall of N.Y. (Wall Street Journal)
The office market in Washington, D.C., is poised to topple New York as the nation's most expensive, reflecting the declining fortunes of the nation's financial center and the government expansion under way in the U.S. capital. Rents declined in almost all of the 79 American cities tracked by Reis Inc., a New York based-research firm, in the fourth quarter of 2009. The largest fall was in New York, where average effective rents -- or the net amount tenants pay after landlord concessions -- fell nearly 20% to $44.69 per square foot annually. It was the sharpest decline in rents ever recorded by Reis since it began compiling data in 1981. By contrast, average rents in Washington were $41.77 per square foot, down 3% annually. Reis estimates that by the end of this year, rents in New York will come down to around $41.07, slightly below their estimates for Washington of $41.27. (Read More)
Pros See CMBS Rally Continuing to Middle of the Year (Commercial Mortgage Alert)
Bond pros predict that super-senior commercial MBS will continue to rally in the first half, but they think triple-B bonds face a tough road. Twelve experts surveyed by Commercial Mortgage Alert expect spreads on 10-year, super-senior bonds floated in 2007 to tighten by 97 bp by midyear, to 383 bp over swaps. If they’re right, that would continue a rally that saw super-senior spreads tighten to 480 bp at yearend from 700 bp at midyear 2009, according to Trepp. The second-half price gains were fueled by infusions of capital from the Federal Reserve’s TALF program and the reemergence of CMBS issuance late in the year after a 17-month hiatus. None of the survey respondents expect super-senior spreads to be wider at midyear. (End of Excerpt)
Rally Accelerates With New Year (Commercial Mortgage Alert)
Commercial MBS buyers plunged back into the secondary market following the holiday break, snapping up all the supersenior paper they could find. The jump in demand, coupled with constrained supply, caused average spreads on top-rated CMBS to tighten by 20-50 bp this week. For example, super-senior bonds from the A-4 class of the benchmark GG-10 deal, which came to market in 2007, were making the rounds at 470 bp over swaps yesterday, down from 505-525 bp a week earlier. “That could trend to 425, easy,” one CMBS trader said, who noted that GG-10 bonds were trading as wide as 560-570 bp only two weeks ago. Meanwhile, spreads on comparable GG-9 bonds, which were issued earlier the same week. (End of Excerpt)
Commercial Mortgage Delinquencies Spike, But There Is Hope (Dow Jones; Lisa Pendergast quoted)
More than 6% of commercial mortgage borrowers in the U.S. have fallen behind in their payments, a sign of potential troubles ahead as nearly $40 billion of commercial-mortgage-backed bonds come due this year. The percentage of loans 30 days or more delinquent rose to 6.07% in December from 5.65% a month earlier, according to Trepp LLC, a commercial-mortgage data provider. While GGP held well-performing malls that weren't under any risk of default in its portfolio, the fact that these aggressively underwritten loans could be extended offers a template for others, says Lisa Pendergast, managing director of mortgage and asset-backed group at Jefferies & Co.
Thursday, January 7, 2010
Real U.S. financial reform out of lawmakers' hands (Reuters)
As U.S. Senator Christopher Dodd attempts to seal his legacy by pushing through sweeping financial reform legislation this year, the real changes that threaten financial firms' bottom lines lie in the ever-shifting hands of regulators. It is the regulators and examiners on the ground who have the ability to set capital standards, judge loan values, and tell firms to avoid risky behavior. So while lawmakers spend the coming months putting the final touches on their broad-brush reforms, a cloud of uncertainty will loom over financial firms, especially because some chief watchdogs are soon due for an exit. "Congress and the legislation sets the foundation and maybe designs the blueprint of the house, but the regulators finish the construction," said David Hirschmann, president of the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness. The chamber is the nation's largest business lobbying group and a vocal opponent of many of the proposed financial reforms.
Johnson seen taking over as Senate banking panel chief (Reuters)
South Dakota Democratic Senator Tim Johnson, a champion of community banks and credit card companies, is expected to take over the chairmanship of the influential U.S. Senate Banking Committee in 2011. With the announcement on Wednesday by Connecticut Senator Christopher Dodd that he will not seek re-election in November, Johnson is next on the seniority list to lead the panel, which is in the midst of a debate over financial regulation reform.
Global financial regulation overhaul seen (Dow Jones)
WASHINGTON/LONDON (Reuters) - Global financial regulation has changed little since the 2008 banking crisis, but that won't be the case much longer. U.S. and EU authorities are expected to hammer out the final shape of a new regulatory order in 2010 that will fundamentally change how world banks and markets operate. Stricter limits on leverage and capital will emerge, leading eventually to slimmer profits for banks, policy analysts said. Formerly unregulated off-exchange derivatives markets will have to conform to new procedures. Lenders' power to package and securitize mortgages and other forms of debt will face new limits, while hedge funds -- once the darlings of high finance -- will face new scrutiny.
Wednesday, January 6, 2010
Dodd to Retire, but What About Financial Reform? (NYTimes’ DealBook)
January 6, 2010, 7:42 am
Senator Christopher J. Dodd, the embattled Connecticut Democrat who was facing an increasingly tough bid for a sixth term in the United States Senate, has decided not to seek re-election this year, The New York Times’s Adam Nagourney reported Wednesday, citing Democrats familiar with his plans. Mr. Dodd, 65, the chairman of the Senate banking committee and a central figure in the government’s financial bailout of 2008 and the economic stimulus package adopted last year, is to announce his decision at a news conference Wednesday afternoon in Connecticut. The decision could have an effect on the economic legislation being considered in Congress. In November he proposed an overhaul that included consolidating bank regulators, creating a consumer financial protection agency and imposing new restraints on exotic financial instruments and credit rating agencies.
Distress Calls Begin to Go Out (Wall St. Journal)
Big-name investors have swooped in on two high-profile commercial real-estate assets in a sign that activity is returning to the investment-property market. Private-equity firm CIM Group has teamed up with New York developer Harry Macklowe to help him regain control of what is regarded as one of the most valuable vacant lots in the world, according to people familiar with the matter. The site of the old Drake Hotel, in Midtown Manhattan at Park Avenue and 56th Street, has been under the cloud of foreclosure for about five months after the collapse of Mr. Macklowe's empire. In the other opportunistic move, private-equity giant Blackstone Group LP is making a grab for Highland Hospitality Corp., a real-estate investment trusts that owns 27 hotels. Highland has been struggling to restructure its $1.7 billion debt load amid the worst downturn for the hotel industry in decades.
Fed Shoots Down StuyTown Bond (REFI)
A bond backing a portion of Peter Cooper/Stuyvesant Town’s defaulted $3 billion senior mortgage was rejected by the New York Federal Reserve in December’s TALF subscription period. The A-3 tranche of the WBCMT 2007-C30 securitization is one of five commercial mortgage-backed securities deals originated from the troubled Tishman Speyer Properties and Blackrock Realty mortgage. The A-3 bond holds a 19.0% exposure to the hulking 56-building, 11,227-unit apartment complex, according to Jeff Berenbaum, an analyst at Citigroup. The same bond was accepted into TALF in July, August and September. “It is likely due to the deterioration in Stuytown and potentially a more harsh overall view on collateral in recent months,” added Aaron Bryson, an analyst at Barclay’s Capital. Both analysts noted continued uncertainty over the program’s acceptance criteria. Berenbaum cited five bonds with exposure to the East River complex that have been granted TALF-eligibility. Those bonds hold exposure ranging from to 4.3% to 18.3%. They include A-2 bonds from Cobalt 2007-2, ML-CFC 2007-5, ML-CFC 2007-6 and WBCMT 2007-C31, as well as the A-SB tranche from ML-CFC 2007-5, which are all part of the property’s senior mortgage in special servicing. “Except for one [bond], each of these has been accepted multiple times, with two being accepted in December,” Berenbaum added.
Monday, January 4, 2010
Insurance Cos To Be Active But Choosy (Real Estate Finance & Investment)
Insurance companies are seeing a fair amount of competitive bidding for mortgages, with the sector expected to remain cautiously active through 2010. "We have been lending, said Greg Walz, managing director at Northwestern Mutual. "There was only a brief hiatus around the second quarter that was not active." Indeed, most insurance companies are back to mortgage lending. They are seen as underwriting loans with strong sponsorship, attractive rates and stringent loan-to-value ratios. A majority of those loans have been in the $30 million or less range, according to Walz. He noted that mortgages over $100 million see less competition and have higher interest rates.
Obstacle Course Awaits Senate Reg Reform Bill (American Banker)
WASHINGTON — Passing a regulatory reform bill through the House was a bruising, months-long fight that appeared ready to spin out of control. That battle may pale in comparison to the legislation's progress through the Senate. After a rebuke by his fellow Democratic colleagues for attempting to push through reform legislation along party lines, Banking Committee Chairman Chris Dodd is now attempting to craft a bipartisan bill. He has little time to waste. With midterm elections expected to distract lawmakers later in the year, observers agree Dodd will have to move quickly to cut deals in order to build momentum back for his legislation. Some of those compromises already appear to be in the offing. Sources said that, among other things, Dodd is considering changing his bill to allow the Federal Deposit Insurance Corp. to maintain its bank supervisory responsibilities — a move that would ease some community bank concerns with the legislation.
Real estate faces a tough slog to recovery (Wall Street Journal)
Real estate, which sparked the global economic downturn in 2008, struggled to recover in 2009. But the path to a full return to health is littered with land mines that could send the sector spiraling downward again, possibly upending the nascent economic revival. The past year's progress in the housing market has relied on government programs that are scheduled to be phased out. The commercial real-estate market is faced with huge amounts of unoccupied space and a deluge of defaults and foreclosures that are putting new stresses on banks and other financial institutions already are on life support. The outlook for 2010 is uncertain, at best.
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