2.28.12: Commercial Real Estate Loan Prices Regaining Pre-Recession Values

Costar reported that the aggregate value of bank and CMBS real estate loans sold last year rebounded to levels not seen since 2008. Whole real estate loans, both commercial and residential, offered by the Federal Deposit Insurance Corp. (FDIC) last year sold at 84% of their book value compared with 34% in 2010 and 72% in 2008. What’s more, performing commercial real estate (CRE) loans the FDIC sold last year went for 91% of book value. Performing residential loans in 2011 also went for about 91% of their book value.

The FDIC also pools sub- and nonperforming real estate loans from failed banking institutions and sells them through structured transactions. In these cases, the winning bidder purchases a portion, typically 20%-40%, of the equity in the mortgage pool. To date, all such transactions have included some form of FDIC financing. Typically, these deals include a number of construction and development loans and hence tend to have lower valuations. The implied value on the winning structured loan bids in 2011 held steady at an average in the low 40% area to book value. The average value of these types of transactions in 2008 and 2009 was in the low to mid-30s.

CMBS loans priced by online debt trader DebtX also climbed to 86.1% as of December 31, 2011 from 85.2% as of November 30, 2011. Loan values were 79.4% as of December 31, 2010.

“CRE loan prices in December rose to their highest level in more than two years,” said DebtX CEO Kingsley Greenland. “The price increases are the result of a decline in treasury yields, a decrease in credit spreads and improving CRE fundamentals.”

This entry was posted in Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress. Bookmark the permalink.

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