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The overriding goal behind the creation of the commercial mortgage backed securities (CMBS) market--to provide a stable source of liquidity to the commercial real estate industry in the United States in all economic cycles--has been achieved, according to a new study by NAA member Ernst & Young's real estate practice. In fact, this goal has now been supplanted by a far bigger objective, the creation of a global market for CMBS. According to numbers provided by Commercial Mortgage Alert, CMBS issuance last year outside the United States reached $12 billion, up from $9.8 billion the prior year and just $600 million in 1998. With U.S. issuance apparently leveled off at a little less than $50 billion, E&Y'S Commercial Mortgage Backed Securities Update 2000-2001 concludes the global market seems to provide the clearest growth engine for CMBS in the years ahead. Last year, major conduit operations were formed in Canada and the U.K., CMBS-funded loans were used to finance an Australian property portfolio, and in Italy and Japan, securitzation was used to sell non-performing loans held by troubled financial institutions. According to Joe Rubin, National Director-Financial Services, Ernst & Young Real Estate Practice, the international growth of CMBS was the big news in the CMBS world in 2000 and is a trend likely to deepen in 2001, although he cautions against expecting the meteoric growth witnessed in the U.S. market just three years ago. In terms of major trends, Rubin pointed to fairly stable spreads on CMBS as one of the main reasons behind the market's relatively quiet year.
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Date:Jun 1, 2001
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