“Update on the TALF and Other Government Initiatives Affecting Commercial Real Estate”
On May 1, 2009, the Federal Reserve announced revised terms to expand the Term Asset-Backed Securities Loan Facility, or TALF. Starting in late June, the TALF will offer investors 5-year loans to purchase new issue commercial mortgage-backed securities (CMBS). The hope is that the expanded program will revive the currently non-functioning debt capital markets for commercial real estate assets.
The revisions to the TALF are just the latest changes to a lending program that already has been altered many times over the past six months. This revision is one more iteration in a series of government initiatives designed to help the commercial real estate industry by reducing the over-supply of commercial real estate debt available for sale, fueling demand for new real estate debt investment, and providing financial institutions with badly needed capital to support new lending.
In our discussions with clients, we have noticed that the continual modifications to the federal government bailout initiatives have led to some confusion over certain aspects of these initiatives and how the initiatives relate to each other. This Stroock Special Bulletin provides a very brief overview of the major government initiatives and their current status.