Economic Update -- Cautious Optimism About TALF

Economic Update -- Cautious Optimism About TALF
March 6, 2009
By: Dees Stribling, Contributing Editor, Commercial Property News

Will TALF--the Term Asset-Backed Securities Loan Facility, in case anyone's forgotten--bring the securitization of loans, especially non-agency RMBS and CMBS, back to life in any meaningful way? The program will get under way on March 25, and Wall Street is keeping a close eye it. And so are players in some real estate niches that used to obtain much of their capital from securitizations.

"Over 70 percent of loans in the tenant-in-common business were originated through securitized product, and when that evaporated last year, it created a great hardship for TICs," Bill Winn, president of the Tenant-in-Common Association and president of Irvine, Calif.-based Passco Cos., told CPN. "To the extent that TALF will help create liquidity, that would be helpful."

Despite the infusion of capital into the financial system since last fall, Winn characterizes lending as "still in a contraction mode. I'm not overly optimistic, but there's some hope that some investors will be willing to buy securitized debt backed by a government program."

There was modest good news for retail on Thursday, and the retail business is taking what it can get at this point. According to the Columbus, Ohio-based consultancy Retail Forward, same-store sales were up slightly in February compared with January for the 35 major retailers that it surveyed. The gain was 0.4 percent, compared with a 1.4 percent drop from December to January.

The leaders, naturally, were Wal-Mart and a handful of discount department stores. Warehouse club same-store sales dropped slightly on account of gasoline, and apparel, accessory and department stores continued to slide. "In some cases, the belt-tightening several months ago amid broad uncertainty has proved too severe as time or need has unfolded,” posited Frank Badillo, senior economist at Retail Forward.

Wal-Mart isn't just a U.S. success story in these difficult times, either. On Thursday, Wal-Mart de Mexico SA (better known Walmex), which happens to be the largest retailer in Latin America, much less Mexico, reported that its sale-store sales gained 1.5 percent in February compared with the same month last year. This is strong performance in Mexico, whose economy contracted at a 2.41 percent annualized rate in December, according to that nation's central bank.

After a midweek uptick on Wall Street, the various Wall Street indices decided to decline again on Thursday, with the Dow Jones Industrial Average down 281.4 points, or 4.09 percent. The S&P 500 was down 4.25 percent and the Nasdaq lost an even 4 percent.