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JLL's Lucey

'We are almost reaching a point where CMBS lenders – from an economic perspective at least – can start originating again.'

By Erika Morphy | Updated on May 21, 2008

It is hard to make the case that CMBS originations might be poised for a thaw when comparing this year’s activities to last year’s immense volumes. Industry statistics put CMBS originations last year at this point at close to $90 billion. This year, they are closer to $9 billion. Still, though, Jere Lucey, managing director of real estate investment banking for Jones Lang LaSalle, says that, if one considers just the economic case, CMBS lenders may be able to start originating loans at a more rapid clip. One barrier to a revival, he tells GlobeSt.com, is that lenders do not have a way to hedge the fixed rate loans they accumulate on their books before they are securitized.

GlobeSt.com: Please explain why we’ve reached the point where the economics are making sense for CMBS originations again.

Lucey: The CMBS delinquency rate and commercial property fundamentals have remained relatively positive. As a result, spreads on CMBS have come in significant – thus taking us closer to a break-even point. Also, a few more deals have originated in the past few weeks – nothing compared to last year’s volumes, of course. But still a good sign.

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