Here’s how you know the commercial-mortgage-backed securities market is in deep slumber: Goldman Sachs, king of the Wall Street shops, hasn’t originated a CMBS loan in nine months, according to two sources close to the bank.
It’s no secret that banks like Wachovia and Lehman and UBS are no longer issuing securities backed by mortgages with the ease of missionaries distributing Gideon Bibles. Investors have had to start hitting up balance-sheet lenders, like regional banks, and cobbling together smaller loans. But Goldman? Goldman is one of the few investment banks that actually has a CMBS crew in place on Wall Street.
“The rest have cut back to skeleton crews,” said a source familiar with Goldman’s operations.
What is one to make of these apparently contradictory signals? On the one hand, nine months is a really long time. On the other, Goldman’s keeping a crew in place is a vote of confidence that the CMBS market will return.
“Goldman has been a little countercyclical, like shorting the whole credit market when things were falling apart,” said the source familiar with Goldman. “Now they seem to be bracing for the CMBS market to recover.”
Steven Kohn, president of real estate investment bank Sonnenblick-Goldman, said he wished he knew when that recovery would happen. “The talk on the Street is anywhere from 12 to 24 months,” Mr. Kohn said. “The market is still difficult. The buyers of those bonds have not resurfaced to any large degree.”
Another broker, who referred to Goldman as the “king,” speculated that it “is probably just waiting till October to start picking up some of the distressed debt. But right now, they’re not seeing the bottom of the market. Everyone’s waiting. We’re going to be in this paralyzed state for a while longer, waiting for another shoe to fall. Is it Fannie, is it Freddie, is it Lehman? Who knows? It could be all three.”