136 Genovese, president of the securities division at the Irvine, CA-based Thompson National Properties LLC, which specializes in providing value-added real estate investment opportunities and asset management. "The best return typically go to investors that dive into the pool first," he tells GlobeSt.com. "In this case, however, because the stakes are so high even the big risk takers are waiting for other investors to go first. For that reason, the greatest overall benefit PPIP will deliver to the market will be to prime the pump, so to speak, he says. "There are a lot of people waiting on the sidelines for TARP and PPIP to provide better transparency into pricing." However, there are those who believe pricing transparency will not be so easily realized even when the PPIP investors start purchasing assets. There will be two types of impact on the pricing and sales of commercial real estate assets when that happens, says Jeffrey Rogers, COO and president of Integra Realty Resources in New York City: psychological and actual. And the former may cancel out the latter. The psychological impact will be a feeling that there is liquidity in the marketplace, which will lead to increased prices, he tells GlobeSt.com. "This initial push is small relative to the market of maturing mortgage debt, thus, the actual impact will be small. But, as prices climb, the banks will be reluctant to sell as they wait and pray for even a higher rebound." PPIP will not be a panacea for the billions of defaulted CMBS loans that will be coming down the pike in the next 12-18 months, says John Long, CEO and founder of Highridge Partners, in El Segundo, CA, a privately held, international real estate investment company. "While the AAA slice may benefit somewhat, the lower rated pieces will still be greatly stressed in terms of pricing and liquidity." Shawn Howton, director of the Daniel M. DiLella Center for Real Estate and associate professor of Finance at the Villanova School of Business in Villanova, PA, is on the other end of the spectrum in his belief that PPIP, as well as TALF, will have a positive pricing effect on senior CMBS that are eligible for the program. "There is money moving into these markets with the hope of flipping the mortgages to PPIP investors once the groups start buying. Many private equity groups have been formed or are being formed for just this purpose." Unfortunately, the market for origination is still non-existent and in this respect will have little impact. "Senior and super senior CMBS tranches have seen spreads contract by as much as 25 basis points in the last week and 50-100 basis points in the last few months." PPIP is after all a new source of liquidity in a world that has been drained of capital, and there is a large contingency of real estate experts that say PPIP was a bad idea from the beginning.
Villanova School of Business 2009 Media Report