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Will wide media coverage of Peter Cooper Village/Stuy Town make CMBS losses more likely?
Media has widely reported that the value of Peter Cooper Village/Stuy Town properties, which were purchased for $5.4 Bn in Nov 2006, is now estimated to be less than $2 Bn. Normally the low estimates do not matter. What really matters is the highest bid or the price one – just one - buyer is willing to pay. Valuation of properties like this is not totally a science, and it is entirely possible for one buyer to put a higher valuation on it than others based on their view of possible upside. However, in this case, such a wide dissemination and knowledge of the $1.8 to $1.9 current valuation numbers, might make it difficult for someone to put a higher valuation on it, even if they otherwise might have done so. With reserves running out, special servicer may not be too keen on taking over the properties. That will make it more likely that they will end up accepting losses on the $3 Bn senior loan, included in five different CMBS deals, and modifying it for whoever emerges as the owner going forward.
Fed's Chicken-and-Egg Problem in CMBS &Two Suggestions on CMBS TALF
By Malay Bansal
More »Observations on CMBS Spread Forecasts
It’s always interesting to analyze forecasts about future spreads and yields. CMBS industry’s weekly newsletter, Commercial Mortgage Alert publishes predictions on future CMBS spreads every January & July. I have always liked to look at them, not because anyone has the ability to predict the future, but because the predictions often provide interesting insights into what the market participants are thinking.
Make Your Own Opinion About Commercial Real Estate
Much has been written about the issues faced by Commercial Real Estate, extent of losses the CMBS bonds will sustain, whether the TALF, PPIP and other government programs will help, and if the commercial real estate market is showing signs of bottoming or is going to keep declining a lot more. There are various views which all seem plausible. If you are not professionally involved in real estate, or if you do not already have a definite view, how do you go about developing your own opinion? This article is an attempt to help with that process.
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