Commercial Property Finding its Footing

Another sign that the commercial property loan market has found its footing and demand is growing.

From Bloomberg:

General Growth Properties Inc. (GGP), the U.S. mall owner planning to refinance $5 billion of mortgage debt, tapped UBS AG and Morgan Stanley (MS) to fund loans as banks rebuild inventory to back bonds tied to commercial real estate.

UBS agreed to provide a $375 million loan on the 977,000- square-foot Providence Place Mall in Rhode Island, according to a person with direct knowledge of the deal who declined to be identified because the talks are private. Morgan Stanley will lend about $150 million for a Humble, Texas property, according to a person familiar with those negotiations. The banks plan to package the loans for sale as securities, the people said.

Comment:  CMBS is making a comeback.  Demand is there and deals are better structured ($6.5B this year).

Article continues:

General Growth, which emerged from the largest real estate bankruptcy in U.S. history in November after piling up $27 billion in debt, plans to refinance $5 billion in mortgages in 2011...

The loans arranged through Morgan Stanley and UBS are two of six the Chicago-based mall operator is shopping to lenders, the people said...“We’re pleased with the quality of the bidding field and support we have received from the lending community,” David Keating, a spokesman for General Growth, said in an e-mailed statement. “The large-loan market is quite strong, which is encouraging as we opportunistically seek to extend term and enhance our financial flexibility.” 

 Full article here:  Bloomberg GGP

Demand for the product is there, ability to get it done is there (note Centro deal - wrote about it on Seeking Alpha) and the product should perform well.  I still worry about all the refinancing that has to be done as the 5 yr product from 2006 and 2007 comes up, but keep an eye on deal flow and quality and if it starts to deteriorate, it will be an exit sign.