PPIP - No Sellers?

US Banker magazine purports that PPIP won't work because their aren't any sellers...

Many observers say demand for the program has dropped off significantly, and will not rebound unless the Treasury can prove there are deals to be had. "I don't see any toxic assets selling yet," says Cornelius Hurley, a professor at the Graduate Program in Banking and Financial Law at Boston University School of Law. "Right now, it's just a bunch of announcements. There's a certain jawboning effect of this, and if Treasury keeps making these announcements, no one is going to believe them anymore, until we have actual deals."

Cornelius, the failure to "see any toxic assets selling yet" is likely a result of being cooped up in an office teaching rather than doing. No offense is intended.

The Treasury Department said in October that five investment funds have raised $1.94 billion in private capital to purchase toxic assets through its Public Private Investment Program.

At the end of the day, the PPIP funds are going to have to target Resi's in large part, and AJs within the CMBS stack. There ARE sellers - AIG is one, but just looking at TALFable CMBS bid lists activity from Barclays (below), you can see that there is plenty of activity - and this doesn't even include AJs!



However, you can also just look at overall bid activity within our little CMBS world, and we're seeing several hundred million per day, and a typical week is $2 - $5 billion in selling...

Coming and Going this week in CMBS...

GGP goes back to court on the 15th, almost exactly 1 year after the troubles at the REIT started to gather steam and the Chicago SunTime's David Roeder valued the company at "almost literally worth nothing" (I think "almost literally" is somewhere north of $5 on the equity, but we'll see). Ackman hopefully will see a nice boost to his GGP holdings late in the week, so he'll be ready for the conference next week with Julian Robertson, Greenblatt, and Einhorn.

DDR apparently got financing on their $400mm TALF loan last week via GS - will be interesting to see how the deal sells. Haven't heard anything other than the media reports. They also successfully raised a $300mm 6.5 year unsecured deal a couple of weeks ago at a 9.75% yield. They're rated BB+. Boston Properties, rated BBB/A-, raised $700 mm in unsecured debt with a 10-year maturity for a 6% yield (as of Friday close).

Freddie sold off $2 billion last week (GS, DB), Ginnie has $200 mm on the table (via Jefferies), and Capmark did a small deal from financing used to help privatize military housing at the 3 AMC (Air Mobility Command) West bases.

PPIP is apparently coming online this week. Should help support the AJ rally despite the looming CRE bad news slated to start before the end of the year. Walter Kurtz has a summary of how PPIP works - some of the numbers are wrong (obviously RMBS + CMBS is > $2 trillion, by like $10 or $15 trillion), but the overall gist is there.

Less Slow

Things got less slow the while I was out of town, but bid lists remain extremely sluggish.

PPIP details released as-advertised. Will include AJs and AMs.

REIS reported MF vacancies at a 22-year high.

Deutsche sold it's last Macklowe legacy asset for $330 (something) a square foot last week.

Deal Junkie highlighted an interesting article on co-tenancy - nothing new here, but just interesting.

Deal Junkie also highlighted an article where Cadwalader is asking lawyers to take a year off ... My favorite yard-hat is the one with Cadwalader on the front, because whichever neighbor walks up to me just keeps staring up at the name trying to figure it out.

Congress just got an earful about the horrible state of CRE from all sorts of folks, including Street analysts. All is lost.

June Retail sales were negative. Retail vacancies hit 10%! BUT Office vacancies win with a 15.9% vacancy rate.

In Miami Florida at the "Big House", Maison Grande filed for bankruptcy. They are a Condo Association (COA).

Duh, RevPAR is down.

Fear not, I'm not switching to a linkfest form, just been away - we'll try to say something more meaningful in the coming days. Spreads rallied today behind all this gleeful news (see, there!).

Weekend Reading

FDIC Publishes Public Comments Regarding PPIP - good for a little chuckle...

Hotel Tango Zero Hedge

PPIP, REIT maturities, Retail Severities, Premier Properties

Goldman talks their CRE book (hopefully, otherwise their conclusions are insane).

->I'll post a more useful analysis on REIT maturities here in the next couple of weeks.

S&P adjusts retail outlook, but still not negative enough. Looking for 44% loss severities. Also noted ICSC is predicting 73,000 stores will close 1H ’09.

Chris P White's Premier Properties was in the news again yesterday.

Obviously, the big news is the Treasury's plan to buy 'toxic assets'. My initial digest of it was that it would fix all the problems, but on further reflection, it's less powerful than it seems for CMBS. It should still lead to sustained, but measured, tightening, however, it only includes currently-rated AAAs for CMBS, which excludes nearly every AJ (as soon as S&P/Fitch start their downgrades). It could be a boon for New Issue by helping to clean the overhand on IB's loan conduits that never got securitized, and might lead to some large loan deals. I still don't have the details on whether positions will be marked daily and margin-called, how much it will cost and investor, and whether or not there will be term-matching. Not to mention whether the evil investors will be burned at the stake if they profit from this program.