TALF for legacy CMBS & Refinancing of 1700 Pacific, Berkeley First City LP, in the Dallas CBD

The next round of TALF for legacy CMBS took place this week as market participants returned home from the CMSA conference in Washington, D.C.  Probably due to investor focus being diverted into other areas, the subscription amount for this month's program remained muted somewhat with only $1.45 billion in investor requests.  Unless the government chooses to extend the program, TALF for legacy CMBS will only be available for February and March while TALF for new issue CMBS is set to expire at the end of June.  Reading into the recent statements made by senior government officials, the comments seem to reflect the mood that the program for legacy securities has served the purpose of propping up the senior portions of the CMBS capital structure and is not in need of renewal.  For CMBS investors, an investment opportunity may exist as we approach this deadline.  

The lack of financing may cause some security values to decline.  In the property markets, transaction velocity remains a concern but some deals are getting done.  The owner of 1700 Pacific, Berkeley First City LP, in the Dallas CBD was able to refinance their existing mortgage with a new $65 million first mortgage from ING.  For the 1.3 million square foot prominent office property, this amounts to a loan basis of $48.50 per foot.  Regardless of the previous in-place financing for this property or the owner's ability to commit additional capital to the project, first mortgage financing to a $48.50 per square foot level may not be sufficient to aid projects in need of capital where the loan basis is much higher.

CMBS Rally to Start 2010

Investcap Advisors LLC

Much of the activity in the CMBS market to close out 2009 was characterized by thin trading. What was thought to be strong sentiment materialized into a very real rally to start 2010. Many wondered this past week, however, whether we had come too far, too fast. After all with conditions in the property markets poised for another rough year, why would sentiment in CMBS be so positive as mortgages continue to sink deeper under water. Along those lines, servicers seem more willing to bring non-performing mortgages to market through auction sales. This is exactly what the opportunistic investors have been awaiting but time will tell if the bid-ask spread has compressed enough to get deals done. Obviously, this will remain very deal specific and plenty of opportunity will exist over at least the next several years. On a final note, it is now official. Tishman has indicated to the lender (CMBS servicer) that they will not be making their mortgage payment this month on the Stuyvesant Town/Peter Cooper Village project. This should not be a surprise to anyone in the market. If the project were to fail to be worked out, the question becomes who is large enough to step into a buyer's shoes....perhaps a governmental agency? Loan-to-liquidated value estimates for the project remain roughly $160,000 per unit.