Public-Private Investment Program (PPIP)

By John Richard, Managing Director, Investcap Advisors LLC

Despite the much anticipated arrival of Public-Private Investment Program (PPIP) assets in the market, the market for CMBS softened over the past week. Market participants are perhaps realizing that the rally in mezzanine tranches was a bit overblown given the deteriorating fundamentals in the property markets. The two announcements this past week that gave the market pause concerned the release of third quarter leasing information and the continued realization that maturing loans are going to pressure the lending community for the next several years. Office vacancies rose nationally rose into the mid-teens while occupancies in the multi family housing sector plunged due in part to the injection of newly built condos into the rental market that were intended for sale. The slump in the housing market and the economic recessionary conditions will continue to pressure the various property types in commercial real estate for some time to come. Apart from that, what also weighs on the market is the over $1 trillion in debt that is coming due between now and the end of 2012. This is a condition that the government financing programs will have less of an impact on since the underwriting processes in practice now are dramatically different than those in place when the maturing loans were originally underwritten.