The Bank of America (BAC) is planning to sell $460 million of commercial mortgage backed securities (CMBS). The issue with a term of seven years will be collateralized by office buildings and industrial facilities in Florida. Fortress Investment Group (FIG) will back the deal. The bonds will have four tranches with $350 million carrying “AAA”, the highest rating grade.
 
Since the maturity dates of the underlying loans are longer than that of Term Asset-Backed Securities Loan Facility loans, the Bank of America deal will be disqualified for the TALF, which had just been expanded to include CMBS offerings.
 
The slump in the property market, which has led to more than 40.0% fall in real estate values and the growing need for borrowers to repay mortgage loans, are raising the pressure on transactions in U.S. CMBS.
 
Developers Diversified Realty Corp. (DDR) was the first to fuel the issue of $400 million of new commercial mortgage bonds earlier during the month, which met with strong investors’ interest. The CMBS offer transmitted positive signals to the market since nearly three-fourths of the issue was sold without lending from the Fed program.
 
These twin CMBS issues have raised a hope of restarting the private-label CMBS market, which slumped to $12.2 billion last year from a record $237.0 billion in 2007. The CMBS issue by BofA is expected to meet with the same investor enthusiasm as the earlier deal.
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