CMBS Market Slows Due to Nervous Investors

Posted October 1, 2011

The CMBS recovery was coming along so strongly in the first two quarters of 2011 that conservative estimates were $35 – $40 billion and some predictions as high as $50 – 55 billion in originations for the year versus $10 billion for all of 2010. Then we had the stock market, job growth, and debt ceiling negotiations turbulence. We lost what head of steam we had. Can we regain it in the fourth quarter?

“The latest deals all involve public offerings that have been bolstered with extra credit enhancements to appeal to the higher level of class holders. And the appetite for the highest rate portion of those deals (dubbed CMBS 3.0) has been strong.

The downside, though, is that the demand for the lower-rated portions of the deals has been muted, prolonging the expected completion of the full deal.”

“CMBS was in recovery in the spring and it looked like things were on a roll. At the beginning of the year, we thought CMBS volume was going to be $35 billion or maybe $40 billion. We were on the conservative side of that. Right now, it looks like we’ll be lucky to cross [the] $30 billion [threshold] for U.S. originations,” said John Levy, founder of investment banking firm John B. Levy & Co. in his podcast this week.

At the link is more from Mark Heschmeyer at CoStar News

CoStar News – Article – CMBS Market Splits as Investors Avoid Taking on Risk

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