CMBS Redux?
Perhaps the biggest challenge the Commercial Real Estate industry faces right now is the lack of capital. All those billions of dollars pumped into the system over the last 10 years by CMBS have evaporated. In many ways, there was too much money. That led to heated competition among lenders to “win” deals by increasing…
Perhaps the biggest challenge the Commercial Real Estate industry faces right now is the lack of capital. All those billions of dollars pumped into the system over the last 10 years by CMBS have evaporated. In many ways, there was too much money. That led to heated competition among lenders to “win” deals by increasing loan-to-value ratios and reducing underwriting requirements. It also was a huge factor in the rapidly increasing prices paid for real estate as low interest rates allowed cap rate compression. I don’t have a crystal ball. I have more questions than answers. But perhaps some of the readers can chime in this week.
Where is the money going to come from? Will CMBS ever be back? If so, how will it be structured? I have heard talk about guarantees, either by the government or private sector entities, of triple-A traunches in order to restart the engine. Does that make sense? Where are these guarantors going to get the kind of liquidity for those guarantees to be worth anything? If it is government, what is in it for the government? What’s in it for the taxpayer? What kind of oversight is needed? How will Rating Agencies get paid?
Let’s hear from the readers this week, even if it is just to ask more questions.
