Sometime around Christmas, The Wall Street Journal reported on a group of commercial real estate trade groups sending Treasury Secretary Henry Paulson their wish list. “Dear Hank,” it could have read, “please include us in the never-ending list of bailout candidates lining up for taxpayer funds.” Their letter was probably more business-like, but you get the point.
The help being requested focuses on the realization that “$400 billion of commercial mortgages will come due through the end of 2009” and there is no lending market to handle renewals. And this figure is limited to CMBS loans or Commercial Mortgage Backed Securities lending which has been unavailable since the end of 2007. It does not factor in maturing bank loans or loans from other lenders. Without a lending market to handle renewals, the lenders will be faced with taking the properties back.
And that would be a real shame.
We are not talking about non-performing loans or loans that are being called due to a payment or other default. These are performing loans that are simply coming to their stated maturities. In truth, the industry is not asking for a bailout, just temporary assistance until the CMBS market recovers and/or until banks start lending again. There no doubt will be talk of tax reform and an acceleration of ideas that have been discussed for years that allow CMBS lenders more flexibility when modifying CMBS loans. The cost to the taxpayers should not be significant.
While they have pitched their idea, the trade groups probably will not get their assistance any time soon since the Treasury has bigger fish to fry, namely the residential real estate situation. But the need is real, and I hope something happens soon. Loading up the market with more lender-owned real estate would be good for nobody.
(Brian Andrews is a certified mortgage banker specializing in the financing of commercial real estate. His business is Andrews Commercial Mortgage and he can be reached at email@example.com.)