Related to close $45 mln Manhattan loan, for CMBS

NEW YORK, June 14 (Reuters) - New York real estate developer Related Companies plans to close on its first loan earmarked for a mortgage security in some two years, its president said on Monday, a sign that recovery for the turbulent market is on track.

Deutsche Bank has agreed to lend Related about $45 million on The Harrison, a new condominium and retail project in Manhattan on 76th Street, Jeff Blau, Related's president, told Reuters after a panel sponsored by the Commercial Real Estate Finance Council.

The loan on the building, which Blau said is 100 percent leased, would be the latest in a host of loans on apartment, retail and office buildings to be completed in recent months, suggesting more activity for the commercial mortgage-backed securities market.

Only five CMBS have been issued since the market reopened from a nearly two-year slumber in late 2009, and just two have similarities to the boom-time deals that provided capital to multiple borrowers.

While lenders are more active, tough underwriting requirements are still squeezing out a huge portion of borrowers who have seen equity evaporate and cash flows diminished during the recession, said Brian Lancaster, head of securitized asset strategy at RBS. But a $716 million CMBS priced by JPMorgan Chase & Co. last week indicated lenders were expanding access to capital, he said.

"It's still a bifurcated market," Lancaster said in an interview. "The question is, Will you see an expansion of lending into the other 90 percent of the market? I think you saw that in the JPMorgan deal."

"It's the same story of the haves and have nots," in terms of who can get a loan, Related's Blau said during the panel discussion. "Underwriters are still very picky."

Deutsche Bank plans to include the Related loan as part of its next CMBS issue, Blau said. He declined to speculate on when the bond would be sold.

The $700 billion CMBS market during the real estate boom was a major source of financing for commercial properties and leveraged buy-outs. Many loans made during the market peak in 2006 and 2007 were made on thin equity and loose underwriting standards, and defaults are now soaring with property values off by some 40 percent and revenue declining.

The worry now is that many of those loans are not able to get financing and will feed a downward spiral for the market in coming years. For now, many refinancings should get done this year and next because they are likely for loans made before the market peaked, and so may still have enough equity, Blau said.

"The problem is 2012, when you have the first 2007 five-year loans," he said. "The good news is it is 2012, and hopefully we'll be in a much better economic climate by then. That's why extend and pretend isn't so bad." (Editing by Leslie Adler)