Commercial real estate is Wall Street’s next crisis. Portfolio posits as much, which is not news to anyone who has been following the bouncing bean of loan syndication across markets, but it’s still a decent read.
In their own way, however, commercial-real-estate loans were no less foolish than those made to home buyers with speckled credit . . . The implosion is going to be a refreshingly simple and familiar story.
In 1995, $15.7 billion worth of commercial-mortgage-backed securities were issued. Through the third quarter of 2007, $196.9 billion was issued, according to Commercial Mortgage Alert, a trade publication. That amount means 2007 will be a record year, even though issuance collapsed in the fourth quarter as investors panicked over the credit crunch. Right now, there is about $730 billion in commercial-mortgage-backed securities outstanding. “Not only have we been in a rising tide, but the loans are very different in underwriting standards than even five or 10 years ago,” says Alan Todd, head of commercial-mortgage-backed-securities research at J.P. Morgan. “We haven’t been through a cycle yet” with these new structures, he adds ominously.”
Ooooh, Jesse had me at “implosion”, but find a way to add “ominously” later and I’m all agog.
As an aside, and this is for Barry, at whose site I spotted the above, how do you make those nice source attributions at the bottom of all your posts? Please don’t tell me you do it by hand.