"The situation got worse last week when Treasury bond yields, on which the loans are based, shot up.
"It's going to bring the price of real estate down," says Gary Mozer, principal with George Smith Partners, a Los Angeles-based commercial real-estate finance firm. The "meltdown" in the CMBS market, as Mr. Mozer calls it, has caused a "sea change" in the amount that real-estate investors can borrow. "People can't pay as much for property because they can't get as much positive leverage," he says.
Mr. Mozer estimates borrowers can get 20% to 30% less than they could have eight weeks ago.
"I've had lenders walk away from the table," he says. "I have an institutional client, one of the largest REITs, that was at the table with a lender for a $230 million deal. The lender walked away and gave back the deposit, saying if they closed, they would lose $20 million. Keep in mind, this client borrows $6 billion a year overall. So that says a lot. The whole market is in upheaval," he says."
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