Developers Diversified First To Use TALF Program

CLEVELAND-Developer’s Diversified Realty Corp. is reported to be launching two bond sales, with the hopes of raising $600 million, in order to test the government’s Term Asset-Backed Securities Loan Facility. The TALF program was designed to increase investor demand for securities linked to a variety of assets, according to the Wall Street Journal article today.

DDR’s two portfolios of assets contain roughly 60 shopping centers across the world and are valued at more than $800 million each. The properties, filled with discount retailers, offer a stable cash flow–a key component to the TALF program. “The assets serve as good collateral for risk-averse lenders,” CIO David Oakes, told the Wall Street Journal Tuesday. If DDR is able to borrow $600 million its loan-to-value ratio will be 40%.

Despite uncertainty of the value of expanding the $1-trillion TALF program to the CMBS market, experts have lately issued a cautious but positive thumbs-up. As reported by GlobeSt.com, this June the Treasury Department expanded the TALF program to CMBS securities issued prior to Jan. 1, 2009.

DDR is unlikely to be the only company looking to take advantage of the program before is expires at the end of the year. Annemarie DiCola, CEO of Trepp, told GlobeSt.TV “there are people in the sector who are very excited about utilizing TALF and the fact that TALF financing can help CMBS investors; and as a result, we have heard, there are a number of deals that are in the works.” According to the Wall Street Journal article, Westfield Group, Macerich Co. and Vornado Realty Trust have all been rumored to be planning on taking advantage of the TALF program.

Not every company will be able to take advantage of the government program, according to the Wall Street Journal article, smaller real estate companies are barred from participating. Loans that won’t qualify include floating-rate mortgages, construction loans and loans for properties being repositioned without a stable financial standing.

To read the full Wall Street Journal article click here.