Capitol Hill

WASHINGTON, DC-At least one CMBS deal, and possibly two or three more, are moving through the securitization pipeline–and they are deals that are not tapped for the Term Asset-Backed Securities Loan Facility. One, according to media accounts, is a Bank of America Corp. $460-million deal backed by office and industrial properties in Florida–with a $47-million triple-B class tranche no less. There are others as well, although less defined and further away from issue, according to one investment banker speaking to on background.

Still, though, this transaction–or possible transactions–does not indicate the re-emergence of the multi-borrower conduit CMBS transaction model, experts on the asset class unanimously agree.

Going forward, the market will be likely to see more TALF-supported CMBS, on par with the Developers Diversified Realty Corp. $400-million transaction earlier this month, David Furman, partner with global law firm Gibson Dunn & Crutcher’s Real Estate practice, tells Even that transaction, deemed successful by many in the industry because it was oversubscribed, was not easy to close, he says.

“It was an arduous process,” he explains. “There have been a number of other REITs that wanted to take advantage of TALF, but backed away from it,” because of some of the regulations of the program, he says.

Another barrier to market supported CMBS transactions, says the investment banker, is lack of supply. “I think the DDR deal proved there is strong demand for sound transactions. But sourcing loans at lower leverage is going to be difficult given the rise in cap rates we have seen over the last 18 months.”

“In many cases borrowers will have to inject additional capital into the structure–which folks are loathe to do not knowing what valuation and fundamentals will look like.”

Some investment banks are starting to cautiously rebuild origination platforms, this person said–but issues coming to market are more than likely to remain in the category of special situation one-off transactions and supported by TALF.