NEW YORK CITY—The diminution of the CMBS market could pose long-term risk for both larger and smaller banks, Trepp LLC recently told the Federal Reserve's Board of Governors. That risk stems from both a reduction of capital available to banks through CMBS and from an increase in exposure to commercial real estate.
With issuance already down year to date, Trepp sees a further drag posed by the the new risk retention rule mandated under Dodd-Frank. After the new rule takes effect on Dec. 24, “Many participants are saying that we'll see market share reductions for CMBS, because CMBS volumes could be cut by as much as 50%,” Thomas Fink, SVP and managing director, told the Fed governors in a presentation now available as an on-demand webinar through Trepp.
Given fewer lenders in the marketplace, borrowers will need to compete for the remaining capital. “The end result, we believe, will be a 25- to 50- basis points decrease in borrowing costs, which in today's low interest rate environment is an increase of 8% to 15% depending on what your current coupon is,” Fink said in the presentation. He also predicted the elimination of securitizations on single-asset trophy properties “because traditionally that has not included a risk retention or a B-piece installment to it.”
Continue Reading for Free
Register and gain access to:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.