WASHINGTON — It’s the equivalent of a Hail Mary pass.
A dozen commercial real estate trade groups, including the International Council of Shopping Centers, have asked Treasury Secretary Henry Paulson Jr. for help, seeking to tap into a $200 billion federal loan program created by the federal government because of the credit squeeze.
Michael Kercheval, president and chief executive officer of ICSC, said in interview that shopping center owners and developers are trying to prevent a crisis.
“You have assets in shopping centers that are not troubled….Retailers are paying the rent, sales are high, there is plenty of cash flow,” he said. “But most of these loans are balloon or bullet mortgages that you pay off all or most of the principle at maturity. The problem is there is nobody out there to refinance that principle balance” when the loan matures.
It’s too early to determine if the government, which has already committed to bailing out banks, credit-card issuers and auto makers, would assist the developers.
“I would be surprised if the federal government helps the developers,” said Gus Faucher, director of macroeconomics for Moody’s Economy.com. “You can make the argument that you need the financial system to work in order to get credit flowing and the economy expanding, but it is unclear to me how developers in and of themselves would help those credit flows.”
The move by the real estate groups is a signal of “deteriorating expectations [and one of] opportunity,” said Victor Calanog, director of research at real estate analysis firm Reis Inc. “If Washington seems open to helping other industries, we better get in line. The worst they could do is say no, and then you’d be in the same spot.”
The real estate groups have raised the possibility of foreclosures, bankruptcies and defaults on a huge scale in 2009 because of the shutdown in the credit markets as hundreds of billions of dollars in debt are set to mature.
“We’re looking at an $800 billion [credit] market that’s been shut down,” said Louis Taylor, real estate analyst at Deutsche Bank. “Commercial real estate is just anther type of loan that people are having difficulty getting. It might not affect as many people as credit cards, but it still affects a lot of people.”
Rich Moore, analyst with RBC Capital Markets, said, “It’s very, very hard for anyone in commercial real estate to find debt today. The issue is not the quality of the retail properties themselves, but ‘Where do I find debt?’ Very high quality regional malls that could always get debt now can’t.”
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