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Michelle Napoli is editor of TIC Monthly, from which this article is excerpted.

Houston—Frank Satterfield, principal of Houston-based mortgage banker Harbor Capital Group, has been working with a TIC sponsor pricing debt for a class B apartment deal. On a recent Friday, a lender quoted the sponsor a loan at 140 basis points over the 10-year Treasury. The rate was not locked, and by the following Monday, the lender’s spread jumped to 200 basis points–a significant increase over the course of essentially one business day. That left the sponsor wondering whether it should try to extend its closing date in the hopes the capital markets will settle down or re-price its TIC deal, Satterfield explains.

Such is the uncertainty in the volatile debt market, a market that has many lenders and borrowers of all types in limbo as financing costs rise, rate locks in some cases are not honored and interest-only periods are increasingly hard to find. TIC sponsors are not immune, and some fear the state of the debt financing market will have a detrimental impact on deal flow and volume in the TIC market for the rest of the year.

“For a couple of weeks, it’s been pretty hectic,” says Satterfield. “Now nobody’s holding a spread for any length of time, and deals are falling out left and right.”

The CMBS market–where most TIC sponsors find their debt financing–began to tighten some this past spring. That’s when New York City-based ratings agency Moody’s Investors Service announced it would implement increased subordination for certain classes of the securities in its review of CMBS transactions, “in response to a trend of declining credit quality,” as Moody’s explained. At the same time, concerns about the subprime residential mortgage market first began to surface–concerns that have since been borne out in what can easily be described as a meltdown affecting all corners of the bond and credit markets.

On top of the current shortage of bond buyers and uncertainty in pricing, there is a flood of new CMBS offerings waiting for securitization. Eric Tupler, managing director in the Denver office of CBRE

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