CMBS

Commercial mortgages had a mixed year in the securitized secondary markets during 2011. The outlook for 2012 is that the sector still faces some hurdles but may hold some opportunities.

Another big year for multifamily construction could push housing starts up 13% in 2012 after posting a 4% increase last year, according to a new forecast from Wells Fargo Securities.

The fight over a capital surcharge for the largest banks took center stage in 2011, at least in the international Basel III process, as the chief executives of some major banks publicly clashed with regulators over the issue.

Last year, securitization players found themselves stumbling towards recovery, as new regulations and a weak economy posed one hurdle after another for deal makers.

Casting a cloud over the CMBS sector for 2012 is an overhang of about $55 billion in CMBS loans that are coming up for refinancing. Industry participants are watching to see how these loans will fare. These mortgages form part of an estimated total of $365 billion in commercial real estate-backed loans coming due in 2012, according to CMBS data provider Trepp.

According to Standard & Poor's 2012 CMBS outlook, as much as 63% of $19 billion in 2007 vintage five-year CMBS loans coming due in 2012 could fail to refinance in case borrowers are not willing to put in additional equity. The rating agency bases its estimate on the $13.3 billion of these five-year CMBS loans for which S&P has adequate net operating income data. Based on this balance, S&P expects about $7 billion to $8 billion of 2007 vintage loans to face refinancing difficulties.

Sears Holdings Corp. announced on Dec. 27 that it is closing up to 120 Kmart & Sears full-line stores.

Federal regulators are seeking comment on a proposal that aims to lessen banks' reliance on credit ratings by proposing three methods for assessing risk on firms' trading books.

Investors behind three CDOs – Cedarwoods CRE CDO III, Concord Real Estate CDO 2006-1 and Resource Real Estate Funding CDO 2006-1 – filed a lawsuit this week to block a junior lender from exercising the fair value purchase option on the $150 million defaulted loan secured by JW Marriott Las Vegas Resort & Spa securitized in CSMC 2007-TFLA, according to a New York court filing.

There is little risk of a negative impact on CMBS from the closure of 100 to 120 Sears and Kmart stores under the U.S. Sears Holdings Corp., according to a Fitch Ratings report.