SOURCE: MarketWatch

Another major development in the capital markets today leading towards what we can only hope will be a more stable enviroment ahead...

Wells Fargo & Co. and Wachovia Corp. agreed to a $15 billion merger that highlights the buyer's strong balance sheet and aspirations to expand its presence in the eastern U.S.

San Francisco-based Wells Fargo, one of the nation's largest commercial mortgage lenders, has mostly avoided the crushing impact of the collapsing real-estate market and subsequent credit crisis by eschewing some of the riskiest lending practices that wrecked rivals and other financial-services firms.

Wells Fargo said it will take $10 billion in charges to put Wachovia's troubled assets on its own balance sheet at fair value, while issuing up to $20 billion of securities, primarily in the form of equity, to beef up its balance sheet.
Wachovia said its board approved Wells Fargo's offer Thursday night.

"This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support," said Wachovia CEO Robert Steel.

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SOURCE: New York Times

The House of Representatives voted on Monday to reject a $700 billion rescue of the financial industry. The vote came in stunning defiance of President Bush and Congressional leaders of both parties, who said the bailout was needed to prevent a widespread financial collapse. Supporters vowed to try to bring the rescue package up for consideration again as soon as possible, perhaps late Wednesday or Thursday.

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SOURCE: AssociatedPress

In the latest news for capital markets, today we learn of the buyout from Citigroup of the operations at Wachovia Bank in a deal facilitated by the Federal Deposit Insurance Corp.

SOURCE: The Wall Street Journal

Insights shared about the possible salvation of commercial mortgage markets if the Treasury plan works...

Today, debt on office buildings, shopping malls, hotels and apartment complexes continue to perform well. The default rate for commercial mortgage-backed securities (CMBS) loans stands at just 0.47%, while commercial mortgages in life insurance company portfolios have a default rate of just .03%.

Nevertheless, the $200 billion annual CMBS market is now dead in the water. Credit to the sector from other sources has almost completely stalled.

Through the turmoil and panic of the past few months, the American commercial real-estate market has delivered some sorely needed stability to the U.S. economy. But even this stability cannot be taken for granted in these unpredictable times.

The credit markets are now blocked by a fear that can be removed by the Treasury plan. And as the problem is solved, credit will be more available to Main Street homeowners, small businesses and consumers of every type. A deep recession can be avoided. Now is the time to act.

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SOURCE: Bloomberg

Still no end in sight for the troubles facing our commercial capital markets...

Government bonds around the world rose after talks on a $700 billion rescue package for the U.S. financial system stalled and Washington Mutual Inc. was taken over in the biggest U.S. bank failure in history.

Washington Mutual became the U.S. biggest bank failure in history yesterday after being seized by regulators and sold to JPMorgan Chase & Co. following $16.7 billion of customer withdrawals since Sept. 16. Financial institutions worldwide posted $522 billion of losses and writedowns tied to U.S. subprime mortgages since the start of 2007.

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SOURCE: The Wall Street Journal

As we watch closely the government's bailout plans, this article explores the possible outcome for commercial capital markets...

For the commercial-real-estate players that were in hot water before the capital-markets crisis of the past two weeks, the temperature is rising.

Even creditors that were willing to make real-estate loans before the upheaval are pulling back, having witnessed the spectacle of some of the biggest names in finance and banking vanishing in a period of days.

To be sure, commercial real estate so far has fared better than residential properties. Many office buildings, shopping centers, warehouses and other income-producing properties are generating enough cash to pay their debt, and their default rates remain low.

Nevertheless, values have fallen because of the credit crisis and economic uncertainty, which is in particular creating headaches for investors who bought at the top of the market with short-term debt.

In the long run, liquidity might be restored to the market by the government's proposed $700 billion financial-bailout plan, which partly involves buying troubled commercial-real-estate debt.

On the other hand, many institutions may be reluctant to accept the government's price if steep discounts are required because the underlying real estate may still be performing well.

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SOURCE: MarketWatch

Third quarter survey shows a glimpse of investor optimism despite the hardships endured so far in 2008...

Buyers and sellers of commercial real estate remain on the sidelines, putting commercial real estate investments on hold in the short term despite an optimistic long-term investment outlook, according to the third quarter 2008 PricewaterhouseCoopers Korpacz Real Estate Investor Survey(r), released today.

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