CPN - February 2009 - (Page 17)

MORTGAGE BANKING Mortgage Bankers Lobby for Immediate, Long-Term Liquidity Solutions By Brad Berton L ike so many of her commercial mortgage banker colleagues across the country, Marcia Upton is frustrated that lenders are not providing sufficient funds to refinance many of her clients’ maturing loans. “A lot of people are looking to me for help, but there is just no secondary market out there” to absorb newly originated debt that is secured by strip centers, apartment communities, manufactured-home communities and the like, lamented Upton, principal for Bankers Mutual in Portland, Ore. After all, if even well-established mall REIT General Growth Properties Inc. is having trouble refinancing its maturing debt facilities, how can Bankers Mutual’s many mom-and-poptype clients expect satisfactory resolutions to their refinancing requirement. Commercial and multi-family mortgages coming due this year alone are estimated at upward of $300 billion. And as conduit lenders are still mostly sidelined amid volatile CMBS valuations, income-property pros fear massive maturity defaults if investors remain unwilling to refinance loans at full principal balances. But mortgage banking industry leaders are not taking it sitting down.They are frantically lobbying federal officials to alleviate the commercial property sector’s deal-stifling liquidity crunch. It is a complicated task, fraught with daunting challenges surrounding the higher-profile residential real estate and banking crisis, a sinking economy crying for stimulus and administrative changeover in Washington, D.C. But operatives representing the Mortgage Bankers Association, other industry groups and market participants continued plugging away as New Year’s Day passed and Inauguration Day approached. “They’ve certainly got their work cut out for them,” Upton acknowledged, while longtime mortgage banking figure Brian Stoffers, president of CBRE Capital Markets, noted that the timing of the lobbying push is not exactly favorable to the commercial real estate sector, which is in far better shape fundamentally than its residential counterpart but must now compete for attention. No doubt, the home mortgage and related banking calamities have captured the bulk of the attention of key legislators and regulators that the commercial pros are targeting: officials with- “(Government representatives are) aware of our situation and evaluating our proposals, but they’re also overwhelmed by the bigger residential issues.” —Brian Stoffers, CBRE Capital Markets in the Federal Reserve Board, Treasury Department, Federal Deposit Insurance Corp. and Securities & Exchange Commission, as well as relevant House and Senate committee members. And,of course,there is some disruption to the continuity of communication efforts as executive leadership transitions from former President George W. Bush’s Republican administration to President Barack Obama’s Democratic team, Stoffers added. “We’re caught by bad timing. It has caused major delays,” he observed. While the going is tough, the lobbying group claims it is making some headway. Government representatives have been reasonably receptive to the industry’s concerns, according to Stoffers, many acknowledging that they would not have known about the pending commercial refinanc- ing crisis if not for the communication blitz. “They’re aware of our situation and evaluating our proposals, but they’re also overwhelmed by the bigger residential issues,” Stoffers continued, adding that Treasury officials have asked for regular updates on industry activity over the past few months.“They’re putting out a lot of fires, so it remains to be seen how much water they’ll be spraying our way.” Indeed, under these challenging circumstances, the MBA, which like other industry associations works closely with the multidisciplinary Real Estate Roundtable, is “doing as good a job as can be expected,” observed John Pelusi, CEO of Holliday Fenoglio Fowler L.P. parent HFF Inc. “We’re doing as much as we possibly can to make sure the powers that be … are aware of the issues we’re facing,” continued Pelusi—who, like Stoffers, is volunteering considerable time to the effort.“We’re making sure all the facts are known, and we’re helping to structure and advance various proposals to create additional credit and liquidity in commercial real estate.” ONE VOICE Stoffers and Pelusi touted the MBA’s accelerated efforts to seek longer-term solutions to the income-property credit crisis, in particular activities of a new high-powered secondary-markets task force chaired by the organization’s newly elected vice chairman, Michael Berman. But they and Berman also stressed that when it comes to seeking immediate public-sector injections of capital to reignite the income-property debt flow, all stakeholders should aim to communicate, as Stoffers put it,“with one voice.” Indeed,Berman,president of CWCapital,thinks the most effective solution to the crisis combines All commercial property types experienced increased delinquencies in November. Multi-family had the greatest increase, 35 percent, and surpassed the $2 billion mark, reaching $2.3 billion. The sector continues to struggle with excess supply in formerly overheated housing markets that have a shadow supply of condominiums and single-family homes to rent. The economic slowdown may also be reducing demand as college graduates who are unable to find employment move back home. Lodging delinquencies experienced the second-highest increase, rising 31 percent to $543.2 million, reflecting weaker business- and leisuretravel demand. Source: Standard & Poor’s www.standardandpoors.com • Larry Kay • 212-438-2504 2400 2200 2000 1800 1600 1400 1200 1000 $800 $600 $400 $200 $0 Dec-2007 Mar-2008 Jun-2008 Sep-2008 Oct-2008 Nov-2008 Lodging Retail Multi-Family Office 17 www.cpnonline.com • February 2009 • COMMERCIAL PROPERTY NEWS CMBS R EALITY CHECK Apartment Pinch (amount delinquent by property type, $ in millions) INDUSTRY PULSE Dialing for Dollars http://www.standardandpoors.com http://www.cpnonline.com

Table of Contents Feed for the Digital Edition of CPN - February 2009

CPN - February 2009 Contents Starting Line Buzzworthy Office Data/Analysis Washington, D.C., Market Profile Ranking: Mortgage Banks & Brokerage Firms Top Deals of 2008 Mortgage Banking Mexico Brokerage Sustainability CPN-Nielsen Claritas Special Report Resource Guide

CPN - February 2009

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