expecting the news--at least the news that CMBS will be part of TALF. While there is a palatable sense of relief that it is official--and more importantly that the loan term has been extended to five years--the decision also highlights how little this move will relieve the liquidity crisis that is still engulfing CRE.

For starters, TALF only covers a small subset of loans that cannot find refinancing: primarily high-quality loans with reasonable debt-service coverage and LTV ratios. Surprisingly--or perhaps not given the events of the last eight months--even loans of this quality are having a hard time finding refinancing, Clifford N. Mendelson, senior managing director of Transwestern's Structured Finance Group, tells GlobeSt.com.

"Don't get me wrong--any liquidity entering our market is a good thing," he points out. "But the need is so great that [what TALF is doing to support low leverage loans] will nowhere near solve our problem." Even conservatively-written loans are having some trouble--although they can sometimes find refinancing, he says. "I have some people that will do loans at low leverage but [number of sources versus demand for that] is 10 or 20 to 1."

Of course TALF was never meant to take on loans that are hopelessly underwater--those IO loans, for instance, written at 85% LTVs in the early part of the decade. That is what the Public Private Investment Program, unveiled more than a month ago is for.

But there is a sense of unease about PPIP, especially without more details about the government's role. "People are worried about making a profit [from TALF or PPIP] and the government jumping in and stopping things," David Akeman, director of capital markets at Stan Johnson Co. tells GlobeSt.com.

There is also the practical matter of better investment returns elsewhere now--even if the market comes to view PPIP and TALF as ironclad. "AAA paper has been between 10% to 12%," Akeman says. "Compare that to 7.5% [in TALF or PPIP] which is a lot more risky. It just makes more sense to own the AAA paper."

Still, though, Akeman and others emphasize, any overture from the government is better than nothing. The worst from the CMBS crisis has not happened yet, Akeman notes. Ten year loans coming due in 2015, 2016 and 2017 will be major problems, given their structure and cap rates. "It will be extremely difficult for those loans to pay off no matter what the government does."

One overlooked benefit of the Fed's intervention--both what it has done and what it has not done--is that it is prompting more in the industry to view real estate as a long term hold asset, David Schechtman, senior director of Eastern Consolidated's Loan Sales and Turnaround Group, tells GlobeSt.com.

"During the boom times real estate was too often viewed as a short-term investment purchased for future value and depreciation," Schechtman says. "In reality, real estate has historically yielded returns over a greater period of time."

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Five-Year Loan Terms Now Reality Under TALF

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