NO CMBS deals: Now what?
By: Myles, July 24th, 2008
When searching for answers regarding the workings of financial markets – past, present and into the future – it is often wise to turn to The Wharton School, one of the most well respected academic institutions, for insights.
In a thoughtful piece entitled, Collateralized Damage: Commercial Mortgage Securities Are at a Standstill, the on-line journal, Knowledge @ Wharton points out that with so much media and federal regulatory attention focused on the global credit crunch, especially the securitization of massive pools of home loans, there has been little notice of what’s been happening with the market for commercial-mortgage backed securities (CMBS).
The article correctly concludes – as this Blog has been writing about in its eight published articles since November 2007 — that the once zestful CMBS market is all but gone, for now.
The Facts: The market for CMBS — packages of pooled loans backed by mortgages on office buildings, industrial properties, malls and other retail centers, and apartment buildings — has been ravaged by market conditions since last fall.
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In the first six months of 2007, 39 deals totaling $137 billion were brought to market and successfully sold, from the highest rated (triple-A) bonds down to the riskier, higher-yielding and lower-rated classes of bonds called B-pieces.
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Through mid-July 2008, only 9 deals totaling $12.1 billion have been completed, a drop in issuance of more than 90%.
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No CMBS deal has been completed since a $1.27 billion offering from Banc of America Securities on June 19.
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There are currently no CMBS deals on the market.
Read the article in full for the full history of the CMBS market. The good news is that many of the CMBS deals are solid. Now the question is where and when will the financing coming from, moving forward?
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