NEW YORK CITY-As the value of malls, office towers and other commercial properties continue to fluctuate given market volatility in Europe and the US, banks are continuing to reconsider and re-tool their CMBS originations. Bloomberg reported late Thursday that Citigroup Inc., Deutsche Bank AG, Guggenheim Securities LLC and UBS AG are in talks to bundle $1.5 billion worth of commercial mortgages and sell them as bonds.
Bloomberg said the plans are only preliminary, but if the deal is completed, sources say it could have financial benefits. Tom Fink, managing director of Trepp LLC, tells GlobeSt.com that the current volatility in interest rates makes it “very difficult” for lenders to originate loans and hold them on their balance sheets, making it harder to accumulate a big enough pool to do a deal on their own.
“It is more efficient for these four lenders, all of whom are major players in the marketplace, when they get enough capital together, it makes sense for them to join forces,” Fink says. “They can get a deal done quicker and they won’t be holding the assets for too long.”
One of the biggest properties that could be affected in the pool is the $176 million in debt on the Poughkeepsie Galleria, a 1.2-million-square-foot shopping mall anchored by Target, JcPenney, Macy’s and Sears, according to Bloomberg. Retail could be hit event harder, after the Gap Inc. announced they are closing 20% of their stores nationwide, which Fink says will “leave a big hole in the mall space.”
With the economy and the financial markets in an uncertain state, unnamed sources told the Wall Street Journal that Credit Suisse Group is considering to shut down its CMBS division and eliminate 50 employees from its staff. The news comes on the heels of New York State Comptroller Thomas P. DiNapoli’s report that New York’s financial center could lose an additional 10,000 jobs by the end of the year.
The impact of these job cuts could have a ripple effect on commercial real estate. “If you have fewer people working, you have less demand for office space,” Fink says. “The financial sector is a big employer in New York City, but it’s not going to affect just Manhattan.”