The Christian Science Monitor has a nice write-up exploring the coming bailout of the commercial real estate industry. Not a lot is new here. It recounts the woes in the CMBS market and declining fundamentals in various sectors. The most intriguing part is the first line--seeming to indicate that something more is coming to help the sector. I can't tell if this is a new program or simply the Fed following through on what was laid out in February in terms of the commercial real estate loans being eligible for the TALF program.
By April, the federal government expects to have a plan to refinance office towers and shopping centers in danger of defaulting. The scale is likely to be massive: Last week Federal Reserve Chairman Ben Bernanke hinted at providing another $1 trillion in credit.
The goal, he said, is to head off a “looming crisis” that could spread far beyond “For Rent” signs and shuttered mall shops. For now, commercial delinquencies are few. But office vacancy rates are heading toward record levels, according to one estimate, and banks are exposed, with $1.72 trillion in commercial real estate loans outstanding as of Feb. 18.
Just as significant, many insurance companies and pension funds have invested in real estate, putting them at risk, as well.
“The need is urgent,” says Kenneth Rosen, a professor of real estate at the University of California in Berkeley. “It is important to get this done before we have another problem.”
(Spotted at Square Feet)
Past links and stories:
- February 11, 2009, TALF Expansion Bodes Well for CMBS Market
- February 10, 2009, Financial Stability Act Expanded to Include CMBS
- January 5, 2009, Latest on the Commercial Real Estate Bailout Push
- Dec. 30, 2008, The Push for the Bailout Continues
- Dec. 29, 2008, Two More Looks at the Developer Bailout
- Dec. 23, 2008, Retailers Want a Bailout Too
- Dec. 23, 2008, REIT Wrecks on the Proposed Bailout
- Dec. 22, 2008, Example of Owner Walking Away
- Dec. 22, 2008, Commercial Real Estate Groups Ask for a Bailout