Real Estate Forum - February 2008

affected us as directly. My sense is it will be the latter part of 2008 before we see a real difference in the lending environment.

and structural changes in the next generation of structured commercial paper.

“Clearly the biggest
focus now is the
lack of lending with
a high loan to value
or within the large
loan segment.”

PETER FEINBERG

RREEF

VICTORIA KAHN: If you think about how quickly the CMBS market changed and how dramatically the spreads widened, it’s difficult to say the market will clear once that $80 billion goes through the pipeline.

Another thought that comes to my mind is whenever you have a vacuum—and we have this illiquidity right now—somebody is going to come in to clear it. Maybe there’s going to be alternative lending mechanisms or new lenders will step in. In the next six months, the picture is going to look very different; we’re going to see a whole different book of lenders.

STEVEN E. PUMPER: How long do
you think the credit crunch is going
to last for the commercial real
estate industry?

PETER FEINBERG: It’s a tough call. Clearly the biggest focus now is the lack of lending with a high loan to value or within the large-loan segment. We’ve been borrowing at lower leverage and for smaller total loan sizes, so the credit crunch has not

PHILIP MCANDREWS: I think Peter’s right. Life companies and pension funds, like TIAA-CREF, have allocations to debt and are placing it in the moderate LTV range, not in the high LTV or high risk space. As for the capital markets, it is clear that structured financing and higher leverage deals have evaporated. How long will this last? Before there is a return to a more

“normalized” market, we need to clear out the backlog of CMBS paper. While the magnitude of the backlog is not clear, many feel there is more than $80 billion worth of paper trying to clear the market. We think it will be six to nine months before that paper starts to move. The bigger question then becomes, what happens to the future of securitized lending? Once that backlog clears, will there be a return to higher leverage limits? How will that new paper be structured? I think we’ll see pricing

PUMPER: According to Fitch, CMBS volume will reach $250 billion in 2007 and drop significantly to between $100 and $125 billion this year. Who’s going to fill that capital void?

DANIEL BRADLEY: The life companies are open for business but on a select basis. They won’t take all of it, but they’re

Hotel borrowing should always be this easy.

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