Commercial property industry seeks bailout aid

NEW YORK (Reuters) - A group of trade associations representing the U.S. commercial real estate industry is lobbying to be included in the Federal Reserve's $200 billion asset-backed bailout plan in order to head off a wave of foreclosures over the next few years.

In a letter to U.S. Treasury Secretary Henry Paulson, industry organizations have asked that the $200 billion Term Asset-Backed Securities Loan Facility (TALF) provide guarantees or financing, or purchase highly rated asset-backed securities collateralized by new or recently originated mortgages.

The program, aimed at unsticking frozen consumer credit markets such as auto loans, student loans and credit cards, was funded at $200 billion from the Fed, with the first $20 billion in losses to be covered by the Treasury.

Paulson said when the TALF program was announced it could expand to include commercial or nonagency residential mortgage-backed securities.

The Treasury acknowledged receipt of the letter and referred questions to the Federal Reserve.

Members of the group have met with U.S. congressional leaders, according to the Real Estate Roundtable, which represents 16 national real estate trade associations.

The seizure of the global credit markets has all but shut down the commercial mortgage-backed securities (CMBS) market, a chief source of funding for the recently ended commercial real estate boom.

So far this year, about $20 billion in CMBS were issued, down from $230 billion in 2007, as buyers of even the highest-rated triple-A bonds shun the market.

"RESTART THE MARKET"

"I think it comes down to less of the government actually buying these bonds and more of the government assisting to restart the market," said Dan Fasulo, managing director at real estate research firm Real Capital Analytics. "The government can buy whatever they want, but without private investment none of us is going to get out of this mess."

Commercial banks, which have curtailed their lending, and the CMBS market comprise about 75 percent of the lending pool for commercial real estate loans, according to the real estate organizations.

"Through the end of 2009, an estimated $400 billion in commercial real estate loans will mature, and the pace of maturities will increase over the succeeding years," the group of a dozen associations wrote in their November 26 letter to Paulson.

"With new loan originations at a standstill, commercial borrowers face a daunting challenge of refinancing maturing debt and, as a result, borrowers and lenders alike may experience rising foreclosures, delinquencies and loan losses," the letter said.

Barclays Capital estimates that $270 billion in mortgages will come due in 2009 with slightly less maturing in 2010. However, maturing CMBS-related loans will grow from $21.8 billion to $38.7 billion.

Real Capital Analytics has identified $106 billion in property that is either in distress or are potentially troubled assets.

Sales of U.S. commercial real estate have dropped 74 percent in 2008 to $134 billion, according to the research firm.

(Additional reporting by David Lawder in Washington; Editing by Brian Moss)