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.