“Lenders are looking to put
some recourse into play
simply because they can.”
WILLIAM HUGHES
MARCUS & MILLICHAP CAPITAL CORP.
to 200 to 400 basis points,” says Sharon. “Today’s financing
terms are an expression of the market’s ‘normalization’ as they
are closer to historical levels.”
According to Keller, the debt market, in general, is tough
because there isn’t parity between the lenders and the borrowers, which is due to the conservative nature of the lenders
combined with the high expectations of borrowers.
“Borrowers got so used to 75 basis points over Treasuries that
the new paradigm is a tough pill to swallow,” he relates.
The days of conduit financing priced at 75 basis points
over the 10-year Treasury are not likely to return any time
soon. But some mortgage brokers around the country report
some, albeit small, tightening of spreads as well as some possible signs of improved liquidity in the overall market. “We’re
starting to see a light at the end of the tunnel,” says Hughes.
“I think the capital markets are stabilizing; we hit bottom a
few months ago.”
Keller, for one, isn’t entirely convinced. “In general, liquidity is not improving, but we’ve enjoyed a few months of
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relative stability that’s allowed borrowers and lenders to close
transactions,” he says. But he does report seeing some indications that CMBS lenders might be sticking their toes in the
water again, namely “having CMBS guys come into our office
to talk to us.” If the CMBS market does get back to business,
he says, we could see some pick-up in volume in early 2009.
People are poised to get back in business, agrees RBS
Greenwich Capital’s Gore, though it’s impossible to know
whether it will take six or 18 months for that to be accomplished. And exactly what the CMBS market will look like
when it does come back is a question many folks are pondering these days.
One school of thought is that it will move to a bank syndica-tion model, where a lender would sell a portion of each loan it
originates, but retain the rest on its balance sheet. Doing so
would mean those players would not only maintain some skin in
the game, but also change their mentality to that of a balance-sheet lender.
The CMBS business may be hibernating for now, but it isn’t
dead, insists Gore. “The question is, when it comes back, does
it come in a way that the originators maintain a portion of the
risk?”
We can only wait and see.
Contributing editor Michelle Napoli is the editor of Real Estate Media’s
Net Lease Forum and TIC Monthly. For more information, go to
www.REMnewsletters.com.
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