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M id A tlantic Real Estate Journal
M id A tlantic R eal E state J ournal Publisher, Conference Producer . .............Linda Christman AVP, Conference Producer ...........................Lea Christman Associate Publisher ......................................... Steve Kelley Associate Publisher ........................................... Kim Brunet Senior Editor/Graphic Artist ..........................Karen Vachon Office Manager ............................................. Miriam Buttrick Sales Intern .................................................Kevin Minassian Contributing Columnists .............................. David Goldfisher Mid Atlantic R eal E state J ournal ~ Published Semi-Monthly Periodicals postage paid at Rockland, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal 350 Lincoln St, Suite 1105, Hingham, MA 02043 USPS #22-358 | Vol. 29 Issue 11 Subscription rates: $99 - one year, $198 - two years, $4 - single copy REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion Phone: 781-740-2900 | Fax: 781-740-2929 www.marejournal.com The views expressed by contributing columnists are not necessarily representative of the Mid Atlantic Real Estate Journal
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CMBS "In the Money"
Appraisal & Advisory Services
C MBS Transitions brand of CMBS 1.0 created to put a new spit shine on an old pair of worn out shoes? Post the 2008-2009 financial crisis, in- vestors of CMBS bonds learned a few valuable lessons as CMBS loan defaults hit record levels and bondholders had to entrust special servicers to fairly ad- judicate losses and recoveries in CMBS loan pools. Not com- pletely satisfied with the pro- cess , many B-piece bondhold- ers were reluctant to re-invest in these loan pools. Investors buying CMBS after 2009 were looking for CMBS issuances to be more pristine with tighter underwriting standards and stronger risk alignment. CMBS 2.0 was announced. Extenders and Pretenders CMBS 2.0 underwriting stan- dards have certainly become more stringent over the last 5 to 7 years. Lenders have reduced LTV's, added more cash management agreements, originated fewer interest only loans and demanded more substantive escrows. In our opinion, however, the most impactful change in CMBS 2.0 targets the special servicers and the controlling class hold- ers. CMBS 2.0 has tightened the reins on the "extend and pretend" plays orchestrated by controlling class holders. CMBS 2.0 forces appraisal reductions/ASER's (Appraisal Was the CMBS 2.0 moniker simply a re-
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contract) and hold the asset for 36 months (governed by the PSA specifically) in REO. Con- trol holder status often took far too long to migrate up the capital stack under CMBS 1.o. Special Servicer and the controlling class holders could avoid taking a "real-time" appraisal reduction even on severely over leveraged as- sets ensuring that the special servicer and CCR stay in tact. The results, at times, were resolutions that were dictated by an "out of the money" spe- cial servicer or CCR. CMBS 2.0 takes a proactive approach to resolving the con- flict of interest issues created when a servicer goes from "into" to "out of" the money in a CMBS transaction. Focus on your niche and let us focus on ours. The prin- cipals at The Henley Group have been working with Spe- cial Servicers, CCR's and Bondholders since 1997. We specialize in proven solutions that Lenders and Bondholders accept. David Goldfisher is prin- cipal and founder at The Henley Group. n firm. Driven by a visionary team, WCRE quickly took its place among the market lead- ers. “We’re happy to add WCRE to the CORFAC family,” said Ray Lyons , CORFAC Inter- national president and broker with Thomas Johnson Re- alty/CORFAC International in Toronto, Ontario. “Their insights and expertise in the Philadelphia region will bring even stronger service to all of our clients.” “It is an honor to have WCRE join the CORFAC family as our newest member firm,” said Jonathan Salk , executive dir. of CORFAC International. n
Subordination Entitlement Reduction) to be taken on more of a spot basis forcing Lenders to mark to market their loans. "In the Money" In a typical CMBS transac- tion, the majority holder of the junior most bonds is desig- nated as the controlling class representative and as such appoints the special servicer for the underlying loan pool. This arrangement works well in the early stages of the REMIC investment where Property values are generally stable and market fluctuations are minimal. The controlling class representative is perceived by the investors to have "skin in the game" and interests are generally aligned in maximiz- ing trust asset recoveries. The CCR is "in the money" so to speak. "Out of the Money" CMBS mechanics do not always react quickly to a changing landscape such as the precipitous market decline and property devaluations ex- perienced after 2007-2008. A special servicer could stall the appraisal valuation process for up to six months (allowed by the Philadelphia region. It pro- vides a complete range of real estate services to commercial landlords, tenants, investors, developers, banks, commercial loan servicers and companies. “CORFAC International provides a global network of resources and knowledge that will greatly benefit our clients,” said Jason Wolf , managing principal of WCRE. “We’ll be able to add those resources to our tradition of individualized service and cutting-edge mar- keting techniques.” Wolf founded WCRE in early 2012 after 17 years of steady growth and success at a top national commercial real estate
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