jstiel

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    • Wed Apr 2nd 20:36 PM | Rating: 0 0
      Commented on:
      Commercial Real Estate: R.I.P.? Not So Fast
      With the CMBX AAA dropping more than 150 bps from 300bps in the past week or so, I'm sure Mr. Lahde has been busy covering his..............short...
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    • Sat Nov 17th 12:19 PM | Rating: 0 0
      Commented on:
      Commercial Real Estate Heads South
      In my opinion, the premise of this post is not valid.

      Widening spreads are not evidence of deterioration in the commercial real estate markets. It only means that financing is getting more expensive. Like the corporate bond market and the stock market, CMBS is the market for the debt, not for real estate itself.

      The above list of contributors does not reflect specific exposure. It shows volume of origination and sale into CMBS from 2006. None of the above info shows current exposure of specific institutions.

      I haven't seen the NREI chart, but I'm sure it shows stressed, not appraised LTVs. You can look at the actual appraised LTVs by reviewing the original SEC filings of each deal. You will find few if any LTVs in excess of 80% and the average loan to appraised values of each deal (pool) are less than 80%

      The problems of the bond guarantors you reference are not caused by CMBS exposure.

      Spreads are usually quoted over Treasuries or Swaps.

      Increased spreads do not increase the chance of default in the near term because these are mostly 10-year fixed deals. Increased spreads could increase refinance risk at maturity, but most loans done 10 years ago are coming off higher rate notes and usually have benefited from increases in rents and amortization.

      Problems that have affected residential generally do not directly affect commercial. In the commercial world, there are no no/doc, low/doc loans. The commercial market did not experience the overbuilding that the availability of subprime spurred in residential.

      CMBS defaults are .3% vs 16% in subprime.

      I'm not saying that CRE is not negatively impacted by the condition of the bond market and the economy, but it is nowhere near as severe as the subprime mess and any suggestion that it is is not supported by the facts I am aware of.
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