Return of the CMBS

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The eagerly anticipated and long-awaited sequel for the commercial mortgage backed securities (CMBS) lending saga is a sure blockbuster in a commercial real estate industry starved for debt capital.  As the banks and Wall Street prepare for another romance, investors should expect fewer thrills.  This plot will have less to do with the supply of capital and more to do with the supply of property that can conform to more conservative underwriting criteria.  In addition to normal market transactions, we might see some recapitalization of existing CMBS loans. The real suspense will lie in whether the fundamentals that drive CMBS, such as hungry institutional bond buyers, low interest rates and pent up equity demand, will prevail over any potential drag caused by the $40 billion in CMBS and $300 billion in non-CMBS maturing in 2011-2012, prolonged recession and joblessness that impact vacancy, rising treasury rates, and a global capital markets liquidity crisis.

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