The Federal Reserve is set to purchase its final round of existing commercial mortgages today, according to Dow Jones, marking the end of this part of the Term Asset-Backed Securities Loan Facility, or TALF, and raising questions over whether the commercial market is strong enough to go it alone. Although by some experts’ accounts the Fed has played a relatively small role in this sector, Darrell Wheeler, head of commercial mortgages with Amherst Securities, said that the program lifted market morale. “TALF provided psychological support for the market,” Wheeler said. “It served its purpose at the time it was needed.”

As the fall of 2009 comes to a close, many of the commercial real estate lenders continue to limit their exposure to financing for real estate. The buzzword for 2009 is “extend and pretend,” whereby a bank extends the term of a loan to a later date. The legendary Samuel Zell, chairman of Equity Group Investments, the keynote speaker at the NYU Capital Markets conference Nov. 19, stated that “our government has become the bailout city. If a loan is kept current, banks will ‘pretend and extend.’” No one is surprised by the “pretend and extend concept,” especially if you had the opportunity to gain insight from the Federal Reserve’s October 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices and hear the comments made by Ben Bernanke, chairman of the Federal Reserve, in a speech at the Economic Club of New York Nov. 16. The Fed’s Opinion Survey addresses changes in the supply and demand of loans to businesses and households over the past three months. The results were based upon responses from 57 domestic banks and 23 U.S. branches and agencies of foreign banks. [more]

Ackman-Ziff’s Russell Schildkraut (left) and CBRE’s Enoch Lawrence

Despite the recent extension of the deadlines for the federal Term Asset-Backed Securities Loan Facility, or TALF, real estate finance experts are divided on whether the program will have any direct impact on New York City commercial real estate even after the program is expected to be up and running next month. Since the Federal Reserve created the TALF program, it has not been used to finance any new commercial mortgage-backed securities pools yet, and experts said that was in part because the credit markets have improved in recent months.  More

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CBRE’s Enoch Lawrence (left) and Sam Chandan of Real Estate Econometrics

In a sign of how troubled the market for bonds backed by commercial
real estate may be, and by extension, the future of some office
building owners, a key deadline for federal bailout money designed to
get money flowing again to landlords has come and gone without any
takers. Up until June 16, investors in those bonds, like insurance companies,
hedge funds and credit unions, had been invited to dip into the Term
Asset-Backed Securities Loan Facility, or TALF, to borrow some of the
$200 billion fund set by the Federal Reserve Bank of New York. The chief reason there’s been zero interest in TALF so far, according to industry analysts, economists and brokers, is that there hasn’t been enough time to put complicated deals together. Indeed, it was only in May that the Fed announced that commercial mortgages would be eligible for TALF money, and a month wasn’t long enough for lenders to market their assets to willing buyers, they say. [more]

The Federal Reserve may have few deals for the start of its program to
aid the commercial real estate market. Today is the first monthly
deadline for investors to apply for loans to buy new commercial
mortgage-backed securities through the Term Asset-Backed Securities
Loan Facility. Today’s application deadline applies to
securities issued this year, and in late July, the Fed will start
accepting investor requests for loans to purchase older CMBS. “I would
be very surprised” if there are any deals this month, said Kevin
Petrasic, a former official at the Office of Thrift Supervision.
“Unless the market really starts to pick up within the next couple
weeks, I think July is going to be a little challenging as well.” [more]

 Left to right: Robert Knakal, Patrick Hanlon, Barry Hersh

Brokerage and financial advisory firms are studying the recently
released federal Public-Private Investment Plan to see how they can
profit from the complex program. The two-part plan provides loan
guarantees for the purchase of troubled loans under the Legacy Loan
Program and securities under the Legacy Securities Program, including
those written on commercial real estate. The Legacy Securities Program
would tap into funds created through the Term Asset-Backed Securities
Loan Facility, known as TALF. The government hopes that credit will
free up as bad debt is removed from bank balance sheets. Experts say
that because the plan is still under development it is difficult to provide
specific examples to New York City, but The Real Deal spoke to three real estate pros to get their take on the local commercial real estate implications. [This is the first in a two-part series on how the federal loan guarantee plan affects New York City real estate. The second part will be on the residential market.] [more]