TALF, TALF, Hurray! Commercial Real Estate Scores Major Victory

The commerical real estate industry, hobbled by a virtually non-existent credit market that threatens the industry’s very day-to-day operations, scored a major victory today with Treasury Secretary Tim Geithner’s announcement that federal funds will be dedicated to backing up the sale of commercial mortgage backed securities.

As The Observer reported in January, the industry’s main lobbying arm nationwide, The Real Estate Roundtable, has been advocating for just such a deal for months:

The money would be used to create a structure modeled on TALF, or the Term Asset-Backed Securities Loan Facility, which will within the month begin using federal stimulus dollars to finance investor purchases of healthy consumer and business loans. (Mr. Rudin has championed the Roundtable’s proposal locally.)

“What we are advocating is, once TALF is running and is functioning for consumer loans and small-business loans, the same concept would work in the commercial real estate arena,” said Jeffrey DeBoer, the Roundtable’s president. “A commercial, TALF-like facility could provide financing to buy triple-A securities backed by commercial loan mortgages. Then banks would be more willing to make the loans. … That is the crux of what we’re asking for.”

Here’s Jeff DeBoer on today’s news:

Statement by Real Estate Roundtable President and CEO Jeffrey DeBoer on Treasury’s Plan to Expand TALF and Stabilize Financial Market WASHINGTON, Feb. 10 /PRNewswire-USNewswire/ — The Real Estate Roundtable enthusiastically supports the sweeping efforts announced today by Treasury Secretary Thomas Geithner aimed at removing illiquid assets weighing down the nation’s financial institutions and threatening the economy.

"The Obama Administration’s comprehensive approach to stabilize financial markets by bringing liquidity back to the economy through responsible fiscal policy is right on target," said Real Estate Roundtable CEO Jeffrey DeBoer. "Today’s plan announced by Treasury Secretary Geithner dramatically expands the Fed’s Term Asset-Backed Securities Loan Facility (TALF) to include new commercial real estate securities.

"The Treasury’s announcement today is an extremely positive step toward reconnecting the credit markets for the huge commercial real estate sector. Extending the Term Asset Backed Securities Loan Facility to newly originated AAA securities backed by commercial real estate loans is a prudent and common sense reform that will have direct, positive effects for the economy. One especially important element of the plan is how it would attract private capital, which is essential to strengthening the economy and minimizing the impact on the taxpayer," said DeBoer.

"Treasury is pursuing the right strategy now to help avoid a potential foreclosure disaster in the commercial real estate sector, which is a cornerstone of the economy. With hundreds of billions of commercial real estate mortgages maturing this year alone and no functioning credit market, many people are concerned that borrowers will technically default. Left unchecked, this could have extremely negative implications for local communities, jobs, and investors. "Real estate directly and indirectly generates economic activity equivalent to about 20 percent of GDP. It creates some 9 million jobs and generates millions of dollars in federal, regional and local tax revenue. Credit to commercial real estate markets from many sources has been paralyzed and needs to be revived. "How and when the slide in property values is abated depends a great deal on policy actions in Washington, and we should pay careful attention to the details to make sure we get this crucial part of the plan right and the program can reach its full potential. Today’s announcement, coupled with the job creating stimulus bill being debated on Capitol Hill, starts to chart a path out of the current downward economic spiral. Additional steps may be necessary, but the essential foundation for restoring a credit market is now being laid," said DeBoer.

Web site: http://www.rer.org/ TALF, TALF, Hurray! Commercial Real Estate Scores Major Victory