CMBS revival marks step toward recovery

J.P. Morgan Chase & Co. has taken an early lead in the race among big banks to revive the business of originating and bundling commercial mortgages into bonds. Banks including J.P. Morgan, Wells Fargo & Co., Bank of America Corp. and Morgan Stanley are ramping up—and in some cases, rebuilding—their commercial-mortgage-backed securities, or CMBS, operations, as investors world-wide increasingly look outside U.S. government bonds for returns. Millions of dollars of fees are on the line, but risks remain with an enormous amount of uncertainty hanging over both the economy and the performance of office buildings, stores, hotels and other commercial real estate. Wall Street is expected to sell about $10 billion of CMBS this year. That amount pales next to $230 billion of CMBS issuance in 2007, the record year for the market, according to data provider Dealogic. But it still amounts to a sharp turnaround from the past two years, when new deals came to a virtual halt as the CMBS market was swept up by the carnage in the broader credit market.

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