Saturday, November 21, 2009

Pace of job losses slows in many states

Michigan’s jobless rate drops to 15.1 percent, still highest in the nation

The Associated Press

updated 11:52 a.m. PT, Fri., Nov . 20, 2009

WASHINGTON - In a sharp improvement, more than half of U.S. states added jobs in October, though economists said many of the gains likely occurred in temporary employment.

That's customarily a positive a sign. Employers usually hire temporary workers before they add full-time jobs. But in this case, the temporary hiring may be inflated by the auto sector, which has boosted production to replace depleted inventories. As a result, the increase might not be sustainable.

Some of last month's job gains also were in sectors such as education, health care and government, which have fared relatively well during the recession. By contrast, there's little evidence that companies in hard-hit industries are hiring permanent staff.

Overall, 28 states added jobs in October. That's up from only seven in September and eight in August. It's also the largest number to record increases since 33 states did so in February 2008, according to the Economic Policy Institute, a think tank.

"It's a positive signal ... that states are mixed rather than uniformly bad," said Jim Diffley, a regional economist at IHS Global Insight. Previous reports have all been "doom and gloom," he said.

Many states that added jobs still saw an increase in their unemployment rates. The figures for jobs and unemployment come from separate reports. The unemployment rate is calculated from a survey of households, while the jobs count comes from a survey of businesses. The two don't always match up.

The unemployment rates rose in 29 states in October from the previous month, the Labor Department said Friday. Thirteen states saw their jobless rates drop.

Michigan still had the nation's highest unemployment rate in October: 15.1 percent. It was followed by Nevada at 13 percent, Rhode Island at 12.9 percent, California at 12.5 percent and South Carolina's 12.1 percent.

California, Florida, Delaware and Washington, D.C., posted their highest unemployment rates on records dating to 1976.

Still, Michigan's jobless rate fell from 15.3 in September, as the state gained 38,600 jobs, mostly in professional and business services sector. That category includes temporary workers.

Other states with heavy auto manufacturing activity also saw jumps in the professional and business category. They included Ohio, Kentucky and Tennessee.

Sophia Koropeckyj, managing director at Moody's Economy.com, said the gains could reflect greater use of temp workers by auto makers. The government's Cash for Clunkers auto rebate program led to big sales gains in August, forcing auto makers to increase production to replace inventories.

But sales dropped after the clunkers program ended. And demand for new cars is likely to remain weak, Koropeckyj said.

"We won't necessarily see a sustained increase" in auto employment, she added.

Koropeckyj said her firm hopes to see higher manufacturing and construction employment. That would reflect increasing business investment, a key ingredient for a healthy recovery. But it wasn't apparent in Friday's report, she said.

Still, there were other positive signs. Texas added 41,700 jobs, increasing its total payrolls for only the second time in the past year. Its unemployment rate edged up to 8.3 percent from 8.2 percent.

Most of Texas' gains were in education, health care and government. California, which added over 25,000 jobs, saw a similar mix.

Oklahoma added 8,800 jobs, the fourth-highest in the country, mostly in professional and business services, education and health care.

Nevada, meanwhile, saw its unemployment rate drop to 13 percent, from 13.3 percent. That's the first decline in its rate since November 2005. Much of the gain, however, was a result of a drop in Nevada's labor force, as about 14,200 people gave up looking for work. People who stop looking for jobs are no longer counted as unemployed.

The national unemployment rate jumped to 10.2 percent in October, the highest in 26 years, from 9.8 percent in September.

Thursday, November 12, 2009

FDIC: Big banks still aren't lending enough

Large banks aren't ‘stepping up to the plate providing credit,’ Bair says

The Associated Press

updated 4:09 p.m. PT, Tues., Nov . 10, 2009

NEW YORK - The head of the Federal Deposit Insurance Corp. said Tuesday she's "very worried" that the nation's biggest banks aren't lending enough and warned the economy could take another turn for the worse without increased access to credit.

FDIC Chairman Sheila Bair said the FDIC's upcoming quarterly report would show that "not many large institutions are doing a very good job of lending." Instead, she said, some are taking advantage of near-zero interest rates by borrowing dollars cheaply to buy higher-yielding assets like stocks or commodities — a move known as the "carry trade."

"I don't see much money going out (from banks). I see a lot of carry trade," Bair told a banking conference in New York. "It used to be you take deposits and you lend out money. We'd like to see more of that."

Many banks have tightened lending standards following a wave of residential and commercial property defaults. Others say they want to lend but see little demand as consumers and businesses seek to pay off debt, not take on more.

The lack of lending by large banks is dangerous at a time when many small and midsize banks are teetering on the brink amid the economic downturn, Bair said.

"I'm very worried (that) the larger institutions don't seem like they're stepping up to the plate providing credit," Bair said. "Because if they don't do that, we're all in the soup."

Addressing the rash of bank failures, Bair said the FDIC had enough funds to shut down troubled banks and would tap its line of credit with the Treasury only as a last resort. There have been 120 bank failures this year, and Bair predicted "many more" ahead.

On the regulatory front, Bair reiterated her agency's bid to require banks to hold more capital as a buffer against rough times, even if it eventually reduces the amount of funds available to lend. She said the requirement would not only protect banks but could also help prevent asset bubbles by reducing excess credit in the financial system.

"I think we have the authority and hopefully the will to do that," she said.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Wednesday, November 11, 2009

Banks Hasten to Adopt New Loan Rules

NOVEMBER 12, 2009

By LINGLING WEI and PETER GRANT, Wall Street Journal

Banks are moving quickly to restructure commercial mortgages under new U.S. guidelines that are more forgiving of battered property values and can help banks avoid bigger losses.

Citigroup Inc., regional bank Whitney Holding Corp. and other lenders around the country are planning to review loans now considered nonperforming to determine if they can be reclassified under the guidelines announced Oct. 30 by bank, thrift and credit-union regulators, according to bank executives and people familiar with the matter. The moves could help the banks absorb fewer losses on troubled real-estate loans and preserve capital.

"It's a positive all the way around," said James Smith, chief credit officer for National Bank of South Carolina, a unit of Synovus Financial Corp.

Matthew Anderson, partner at research firm Foresight Analytics, estimates that about two-thirds of the $800 billion in commercial real-estate loans held by banks that will mature between now and 2014 are underwater, meaning the loan amount exceeds the value of the property. The flexibility extended by regulators will apply to $110 billion to $130 billion of these loans, he said.

The guidelines are controversial, with critics accusing the U.S. government of prolonging the financial crisis by not forcing borrowers and lenders to confront inevitable problems.

Regulators respond that they are being prudent, adding that a crackdown will occur at any banks misinterpreting last month's announcement as an opportunity for leniency.

"We will push banks to be realistic [about losses] and will drag them out of denial if that's what we need to do," Tim Long, senior deputy comptroller at the Office of the Comptroller of the Currency, said in an interview Tuesday.

Regional and small banks are the most likely financial institutions to benefit from the guidelines because of their exposure to commercial real estate. More than 2,600 banks and thrifts have commercial real-estate-loan portfolios that exceed 300% of total risk-based capital, according to an analysis of regulatory filings by The Wall Street Journal. Nearly all of those institutions have less than $5 billion in assets.

Regulators consider the 300% threshold a red flag, though it doesn't necessarily mean the banks are in danger of failing. Risk-based capital is a cushion that banks use to cover losses. Commercial real-estate woes contributed to 100 of the 120 bank failures this year, according to Foresight Analytics.

Supporters of the guidelines note that commercial properties still can generate enough cash to pay debt service on mortgages even if they are underwater. In such cases, banks shouldn't be required to classify the loan as delinquent and reserve capital against it.

"If you're going to take a hit, make sure you're taking a hit for a legitimate reason, not because an examiner is making an immediate judgment on the loan," said Tom Flexner, Citigroup's global head of real estate.

Regulators also suggested ways for banks and borrowers to restructure loans and avoid foreclosure even if the properties can't pay debt service. Banks can carve troubled loans into one performing part and one nonperforming part. That would allow the bank to incur losses on only the nonperforming part, not the entire loan.

In an interview, Joe Exnicios, chief risk officer of Whitney's Whitney National Bank unit, of New Orleans, cited a hypothetical example in which a developer borrows money to develop a small retail center and gets a drugstore chain to sign a lease for one store. If the developer can't sell the other sites, he would be unable to repay the loan. Under the new guidelines, the bank could create a healthy, performing loan supported by the drugstore lease and a nonperforming loan from the rest of the loan. "It may make a difference on whether you need to have additional capital and take additional reserves," he said.

Critics agree that regulatory flexibility might help some banks avoid failure. But the troubled loans remaining on their books will discourage them from lending, reminiscent of Japan's "lost decade" in the 1990s.

A better solution, critics said, would be similar to the approach regulators took during the commercial real-estate crash of the early 1990s.

"Back then, regulators moved aggressively to force banks to take write-offs and sell off their troubled loans, and the market recovered faster," said Mark Edelstein, head of the real-estate group at law firm Morrison & Foerster LLP.

Some observers also worry that the guidance could lead to fewer real-estate transactions.

"The question becomes: Are you going to invest in new properties knowing that there is this overhang [of troubled loans] that could hit you?" said Michael Straneva, global head of Ernst & Young's transaction real-estate practice.

Bankers respond that some critics would prefer that regulators pressure banks to sell assets so they can scoop them up at steep discounts.

"The people who are complaining the loudest are the people who want to buy the real estate," said Pat Goldstein, head of real estate for Emigrant Savings Bank in New York City.

—Maurice Tamman contributed to this article.

Write to Lingling Wei at lingling.wei@dowjones.com and Peter Grant at peter.grant@wsj.com

Tuesday, November 10, 2009

Construction nears standstill

Commercial sector enters ‘drought’ with demand staying low

By Brian Wargo (contact) Las Vegas Sun

Saturday, Nov. 7, 2009 | 2 a.m.

The state bird of Nevada, the construction crane, is on the endangered species list.

The good news, at least, is that it still has a few places to roost — maybe an amazing achievement in itself, given the economic climate.

Las Vegas research firm Applied Analysis reports there are nine commercial projects of consequence under construction off from the Strip in Southern Nevada. Once most of those projects wind down early next year, there’s not much in the pipeline and development will essentially cease, said Jake Joyce, an analyst with Applied Analysis.

“With limited projects remaining under construction, the build-it-and-they-will-come mentality has gone the way of pillbox hats, Benny Goodman and your grandmother’s dance card,” Joyce said. “Essentially, commercial is following the same path as tourism. It is about supply and demand.”

After the completion of CityCenter, the most prominent project under construction will be Tivoli Village at Queensridge, which recently resumed work on its mixed-use development after virtually halting it a year ago. Also, Marnell Properties on Monday will break ground on a 200,928-square-foot airfreight logistics center on McCarran International Airport’s new Terminal 3.

With the completion of most of CityCenter in December, the long-range outlook, analysts say, is that there won’t be another major casino project built on the Strip for another decade.

With commercial vacancy rates at record levels, weak demand because of the economy and job market, and with credit hard to obtain, the chance for new projects is low. Las Vegas now has the same amount of space occupied as it did in 2006, and there’s been millions of square feet added since then.

“It will be pretty bad,” said John Restrepo, principal of Restrepo Consulting. “We are going to have a drought of commercial construction for a number of years until we burn through this inventory.”

Commercial has nearly caught up with the home construction industry, in which builders are taking only about 400 permits a month because of weak demand given the foreclosure inventory. Fewer than 5,000 homes will be built in 2009, compared with more than 35,000 a year during the boom.

The office market has 11.2 million square feet of empty space with a vacancy rate of nearly 23 percent. That equates to about five years of inventory, Joyce said.

With the unemployment rate in Las Vegas at 13.9 percent and rising, there won’t be job creation to spur demand for office and industrial space, Joyce said.

The industrial real estate market is hurting too, with 13 million square feet of vacant industrial space, which is about two years of inventory.

The retail sector has 5.1 million square feet of vacant space, a supply of about two years, Joyce said.

With foreclosures expected to increase in 2010, the value of vacant commercial space will slide and make it more difficult for developers to build anything that can be competitive, analysts said.

Besides Tivoli Village, another project kicking off is a $29 million freight and mail sorting operation for FedEx, UPS and airlines scheduled to be completed in about a year.

Analysts said projects such as the Marnell Air Cargo Center will proceed because they’re built specifically for companies rather than speculative development. The project is nearly fully pre-leased.

Other projects Applied Analysis reports are under construction off the Strip are:

• A 412,000-square-foot warehouse facility at the southwest corner of Sunset Road and Torrey Pines Drive.

• A 50,000-square-foot distribution center on Trade Drive in North Las Vegas.

• The 48,047-square-foot Tuscano Medical Park Building C on Jeffreys Street.

• The 130,000-square-foot Corporate Center at the Curve on West Teco Avenue.

• The Campos Office Building — 84,184 square feet of government office on Bonanza Road.

• Caroline’s Court — 258,210 square feet of retail at U.S. 95 and Durango Drive.

• Phase 2 of retail development totaling 101,550 square feet at Horizon Ridge and Green Valley parkways.

The list is telling because in early 2007 — when commercial construction was booming — there were 75 to 100 projects under construction, Joyce said.

At least three dozen office projects that Applied Analysis had previously listed as planned are on hold because they are no longer being marketed, Joyce said. That doesn’t include other projects under construction that have stalled because construction loans expired and banks won’t extend them.

“The banks are trying to shore up their balances and it doesn’t make sense to loan more money on a project that is going to sit vacant and they are eventually going to take back,” Joyce said.

Added Restrepo: “We won’t see much if any new spec commercial development until we see vacancies below 10 percent for an extended period of time.”

That’s quite a comedown for a region that had twice the construction employment as the national average. No one ever expected a slowdown of this magnitude, Restrepo said.

“Southern Nevada went through a long stretch having a disproportionate share of its job base in construction, at least by national standards. Many in the community started to believe that this reflected a normal and sustainable job base. The recession has dramatically shown how transitory construction employment really is,” Restrepo said.

In its latest quarterly report, the Associated General Contractors of Las Vegas said 19 commercial building permits were issued in September with a value of $10 million. Between September 2007 and September 2008 the value of commercial permits averaged $130 million per month.

Steve Holloway, the industry group’s executive director, said it may be another two to five years before commercial construction picks up in the private sector and that hope for the near term is expanded government spending.

The slowdown in construction has also prompted an exodus of construction workers because about 15,000 of the 50,000 union-hall workers are considered “travelers,” in that they relocate to markets temporarily for work and return home when work is no longer available, Holloway said.

“Once CityCenter is done, that is going to be it for a while,” Holloway said. “It is going to be ugly. There is so much supply that it will remain idle for a while. Unless some huge project magically takes off, I think Southern Nevada is going to remain in this recession two to five more years.”

Holloway said tourism won’t be enough to push Las Vegas out of its recession because construction is the second-largest industry in an economy predicated on growth. That industry pays more than 30 percent of sales and use taxes, he said.

“Unless construction recovers both nationally and locally, we are not coming out of this recession no matter what gaming does,” Holloway said.

Friday, November 6, 2009

Gloomy times for commercial real estate

Carolyn Said, Chronicle Staff Writer

Friday, November 6, 2009

Shopping centers, office buildings, industrial spaces, hotels and apartments can expect a period of "enveloping gloom" from the recession and credit crunch, according to a report released on Thursday.

Values will plunge, vacancies will rise and rents will decrease across all types of commercial property before the market hits bottom in 2010, according to the "Emerging Trends in Real Estate" forecast from the Urban Land Institute and PricewaterhouseCoopers LLP.

Based on interviews with 900 industry leaders, including investors, developers and financiers, the report was released at an Urban Land Institute conference for developers, planners and other real estate professionals taking place this week at San Francisco's Moscone Center.

No quick recovery is in store, the report said. "2010 looks like an unavoidable bloodbath for a multitude of 'zombie' borrowers, investors and lenders," it said. "The shake-out period may extend several years as even some conservative owners with well-underwritten loans from the early 2000s see their equity destroyed."

One flicker of good news was that investors with cash to burn should find some exceptional bargains amid the carnage. Properties may lose 40 to 50 percent of the values they enjoyed at their peak in mid-2007, the report said.

Apartments are likely to be the first sector to recover in sync with the economy, as young people who were forced to move back in with their parents seek their own places as soon as they find jobs, the report said.

Retail is likely to undergo the most wrenching problems. While top-tier malls and infill shopping centers with grocery stores will still attract customers, many struggling malls in secondary markets "will be worthless soon," one person interviewed for the report said.

"It's triage time with retail," said Jonathan Miller, the report's author. "A lot of people will give up on the weaker malls."

Ground-up building is likely to enter suspended animation for the next few years. "Why build anything if you can buy existing real estate so cheaply?" said Stephen Blank, senior resident fellow for real estate finance at the Urban Land Institute.

The report also assessed the relative strength of core urban markets. Washington, D.C. - recession-proof because the federal government eschews layoffs - ranked No. 1 for expected resilience.

San Francisco came in second because of its "multifaceted economy, proximity to high-tech Silicon Valley, and history of bouncing back from corrections," as well as its links to other global capitals and its "brainpower jobs."

Although San Francisco has taken some hard hits in the past year, experts interviewed for the report "feel it will bounce back before other markets," Miller said.

E-mail Carolyn Said at csaid@sfchronicle.com.

Thursday, November 5, 2009

Commercial property market to hit bottom in 2010, report says

Owners of properties such as office buildings, warehouses and malls will suffer a surge of painful defaults, write-downs as the market finally faces up to the reality of its diminished conditions.

By Roger Vincent, Los Angeles Times

November 5, 2009

After spending more than a year in suspended animation, the commercial real estate industry is expected to hit bottom in 2010 with a wrenching thud.

Owners of business properties such as office buildings, warehouses and malls will suffer a surge of painful defaults, write-downs and workouts with their lenders as the market finally faces up to the reality of its diminished conditions, according to a report set for release today.

The long-awaited blood bath, however, will benefit investors who are able to swoop in to take advantage of record bargains.

Unlike the formerly overheated housing market, which is in the process of being purged through foreclosures and sellers' growing willingness to lower their asking prices, the business of buying and selling commercial real estate has been stuck in neutral since the recession kicked in.

So far, potential sellers have been loath to lower their prices, and banks have been unwilling or unable to lend money for purchases. Even financially strapped owners who are unable to keep up their mortgage payments haven't had to let go because their lenders don't want to take back distressed properties in a down economy.

Banks instead have often been willing to renegotiate loan terms, a practice drolly referred to as "extend and pretend," as both lenders and debtors hoped the market would turn around.

The era of wishful thinking is about to end, according to industry professionals who participated in a study by consulting firm PriceWaterhouseCoopers and the Urban Land Institute, a real estate industry trade group and think tank.

"The recession," said Richard Kalvoda, a partner at PriceWaterhouseCoopers, "is now impacting the fundamentals of real estate."

A key fundamental, for example, is office leasing. As white-collar companies lay off employees or go out of business in the tough economy, they no longer need as much office space. Landlords, in turn, lose rental income and find it harder to make mortgage payments.

With vacancy growing -- about 51 million square feet of space is empty in Southern California -- and rents falling, commercial property values are in the midst of the biggest drop since the Great Depression. Industry experts predict properties will have lost 40% to 50% of their value from the peak of mid-2007 by the time the market presumably reboots next year.

Retail and office properties will take the biggest hits, the report said, as nervous consumers curb spending and companies delay rehiring. Many landlords who are barely hanging on now will lose their grip in 2010 -- and some investors can hardly wait.

"Our report participants find that a sense of nervous euphoria is growing among liquid investors who can make all-cash purchases," said Stephen Blank, a senior resident fellow at the Urban Land Institute. "Those that are patient, daring and selective could score generational bargains on premium properties from both distressed sellers and banks that are clearing out unwanted bad loan and real estate-owned portfolios."

Among those poised to leap is real estate fund manager Xavier Gutierrez of Phoenix Realty Group. The New York-based firm is sitting on $450 million it has ready to buy real estate, including $170 million earmarked for the Los Angeles area. The money will be invested on behalf of pension funds and insurance companies, he said.

The current real estate scene is "definitely grim," he said, but the outlook for three years from now and beyond is much better.

Southern California has a young population that is still growing from new births and immigration. Apartments may be the first commercial real estate category to recover as a large cohort of people in their 20s leave home or stop doubling up with roommates when their economic status improves, Gutierrez said.

The region also is well-positioned for recovery in international trade through the ports of Los Angeles and Long Beach and local airports, he said.

Hotels, which have been particularly hard hit by the recession, can also bounce back quickly when the economy improves, said Kalvoda of PriceWaterhouseCoopers. Office buildings, which are dependent on hiring, and malls, which are dependent on consumer confidence, probably will take longer to recover.

Real estate industry leaders who are meeting at the Urban Land Institute's annual gathering in San Francisco are more optimistic than they were at this time last year because they can see the reckoning finally on the horizon, said Richard Green, director of the USC Lusk Center for Real Estate.

"The mood is considerably lighter," he said.

Green is concerned, though, about whether bankers will do what he thinks they should.

"One thing that is worrisome is that banks are still delusional," he said, extending weak loans while hoping for a turnaround that will preserve older, higher property values.

"There are people out there who need to realize that we need to take the hurt and move on," Green said. "People who have moved on see an opportunity."

roger.vincent@latimes.com

Copyright © 2009, The Los Angeles Times

Wednesday, November 4, 2009

CMBS Savior? Developers Diversified Deal Is Nearer

Fed Worry Is Easing, Clearing Path for Test of TALF; 'We Need a Transaction Approved to Reconnect the Market'

By LINGLING WEI, Wall Street Journal

A closely watched deal that may help uncork the commercial-property debt market is picking up steam after being threatened by some queasiness by the Federal Reserve, according to people familiar with the matter.

The Fed is sending signals that its concerns over the deal are easing, paving the way for the first sale of commercial-mortgage-backed securities, or CMBS, through a major rescue program called the Term Asset-Backed Securities Loan Facility, or TALF. The credit-starved real-estate industry has been hoping that the debt sale by shopping-center giant Developers Diversified Realty Corp. would lead to other CMBS sales.

Developers Diversified announced in early October that it had obtained from Goldman Sachs Group Inc. a $400 million loan, which Developers Diversified and Goldman intended to be converted into a CMBS offering through the TALF program. But the Fed, mindful of protecting taxpayers' interest, had shown reservations about financing the deal because it involves just one borrower, according to the people with knowledge of the issue.

Single-borrower CMBS offerings are considered riskier than multiple-borrower deals, with the risks spread over many different borrowers as well as different kinds of commercial buildings and geographic locations.

"The Fed is being very conservative, very diligent in reviewing collateral and very risk-averse," said Frank Innaurato, managing director at Realpoint LLC, a credit-ratings firm.

The Fed is still reviewing the deal and may still decide it is too risky. But in recent days, the Fed has indicated progress with reviewing the 28 shopping centers owned by Developers Diversified and underlying the $400 million loan, and the deal likely will be closed in the coming weeks, the people said.

If the Fed opted against the deal, Goldman likely would try to sell the $400 million loan outside of the TALF program. Representatives at the Fed, Developers Diversified and Goldman declined to comment.

Mounting Worry

Regulators are getting increasingly worried about the commercial real-estate market as rents and occupancies fall and defaults mount. The growing pressure bad loans are putting on the nation's financial institutions are jeopardizing the economy's recovery.

Part of the problem has been the evaporation of the CMBS market, which had been one of the top sources of real-estate finance. TALF is designed to revive the CMBS market as well as markets for other securitized debt by offering low-cost financing from the Fed for investors buying these securities. Investors can borrow as much as 95% of the bonds' value by pledging the securities as collateral. That means that if there is a default, taxpayers take most of the risk.

CMBS offerings are considered one of the key tests for the TALF program, introduced by the Fed in March. Since then, TALF has been viewed as a moderate success, helping borrowers from auto companies and credit-card issuers raise capital. The Fed has so far made about $40 billion in TALF loans to investors buying these securities, which has sparked a market rally and reduced the cost of borrowing.

The Fed extended TALF to include newly issued CMBS in June. But there have been no deals so far, even though a dozen or so new CMBS deals are hoping to take advantage of the program.

Like the Developers Diversified deal, these potential deals also are collateralized by multiple properties owned by one owner. While the Fed has indicated concerns over such deals, banks remain reluctant to take on "warehouse" risks associated with having to pool together loans from many borrowers. Other CMBS deals in the pipeline include those by Inland Western Retail Real Estate Trust Inc. and Vornado Realty Trust. J.P. Morgan Chase & Co. is working on both deals.

"We need a transaction approved to reconnect the market," said Jeffrey DeBoer, chief executive of the Real Estate Roundtable, a lobbying body for property owners and investors.

High TALF Bars

The deal Developers Diversified has in the works reflects the high bars the Fed sets for the type of loan it will accept as eligible for TALF financing. The $400 million loan it got from Goldman is secured by shopping centers with stable cash flow because they are occupied by discount retailers that tend to attract business even in a recession. The $400 million loan represents about half of the value of the underlying properties. By comparison, during the years before the recession, banks were willing to lend as much as 70% of a property's value because the debt could be easily sold as CMBS.

But not everyone is going to benefit from the TALF program. Tight restrictions will bar thousands of small developers and commercial-property owners with heavy debt loads from participating. Among loans that won't qualify: floating-rate mortgages, construction loans or loans secured by properties that are being "repositioned" and don't have a stabilized cash flow.

Write to Lingling Wei at lingling.wei@dowjones.com