Trader Talk

Good Sign for REITs, Banks, Commercial Real Estate

A good sign for REITs, banks, and commercial real estate:

UBS and Deutsche Bank just priced a $1.4 billion deal to securitize a basket of commercial real estate.

The commercial mortgage backed securities (CMBS) deal consisted of 39 percent office properties, 24 percent retail, 22 percent hotels, 10 percent multifamily, the remaining 5 percent a mix.

This is good news for banks because it will reinforce that they can continue to lend to commercial real estate. Securitization enables them to make more loans. They can, for example, make $100 million in loans, keep $50 million of it on their books, and securitize the other $50 million.

It's good news for smaller commercial real estate players and REITs because banks will be more likely to lend to them.

This secures a source of financing that was not available in 2008. There has already been $20 billion in CMBS deals so far this year; hopefully there will be more.

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