CMBS Loans Rising From the Ashes - A Positive Sign in the Commercial Real Estate Market

We have all been waiting for signs of a recovering bank lending business for commercial real estate. We see signs that this situation is beginning to change. Goldman Sachs, JP Morgan and Citi Bank are all releasing capital raises for Commercial Based Mortgage Securities for the first time since the crash took hold.

While the economy remains mixed, with the Federal Reserve concerned over deflationary pressure and maintaining very aggressive money supply management activity in place, the likelihood is that this is the beginning of continual easing and more easily accessed capital for real estate projects and investments.

The Congress just shot down a small business lending bill. However, in the face of the federal reserves view, I expect this legislation will be resurrected after the August recess and passed. This will add further momentum to this very important part of the economic recovery. Concessions will be made the Republicans but in the end neither party can afford to go back to their districts telling small business that they stopped legislation designed to help a major part of their constituency get their engine running.

Further, foreign investment in real estate securities is accelerating as other parts of the globe see the U.S. as a strong location to place capital and achieve very strong appreciation. Add to this that significant capital is being held in reserve by large business and there is still greater emerging pressure to put investment capital to work..

Next, the U.S. commercial market implosion has dramatically decreased prices and values. Every segment has been hit hard. By some estimates commercial values are down 43% and in some areas even more. For investors the potential for excellent values is greater than it has been in years and in many ways perhaps the best opportunity in decades. For banks and buyers the opportunity to capture assets that will provide excellent performance with very safe positions is extremely enticing.

Finally, the projected U.S. population growth rates and the likely lift in demand from global expansion (especially Asia) for the United States very strong commodity and high end industrial products creates a strong foundational basis to expect strong appreciation in the future.

The combination of all these trends, events, and facts create a clear picture of strong commercial lending. The CMBS deals we see coming to fruition are the beginning of the rebound for lending and investing in this area.