Commercial Real Estate as Wall Street’s Next Crisis

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.


  1. Cut & Paste, baby, C&P.

  2. That’s distressing news. You must have been an English professor in a prior life.

  3. That whole article is very short on anything I’d call useful data. So it’s a big set of securitizations. Big deal. The problem with RMBS was one of moral hazard. Guys underwriting risk undertook none of it. From what I understand this is not the case with commercial loans. Servicers in general hold equity tranches of paper. Or am I wrong.

  4. It is impressive and adds authority. Maybe it helps searches also. Someone should invent a tool that does this for all of our links.

  5. Too much of the blogosphere is just “cut & paste” (I’m as guilty as everyone else). You prolly already have headline/URL, and maybe author, so its not too much trouble to add publication and date.
    Although I do generate some original content, I wanted it to be crystal clear what the sources are for the quotes and excerpts.
    Blame law school and all of the law review citation training . . .

  6. The Centro, a commercial property trust, has just hit the headlines in Australia due to the credit crisis.