free Webinar DECEPTIONS hosted by: IN CMBS
SPEAKERS Ann Hambly President & CEO 1st Service Solutions Commercial Real Estate Advisors Commercial real estate is no longer a relationship business. Owners often don’t have access to, or even know who the decision makers are on their loans. We provide advice and solutions for anything ranging from the addition or removal of collateral on an existing CMBS loan, to the most complex loan restructure for all loan types, nationwide. We Rob Seidenwurm create a strategy for the owner based on their specific objectives, including avoiding or delaying tax consequences SVP of Legal Outreach and blend that with the expectations/requirements of the particular Lender/Special Servicer. We also provide the 1st Service Solutions owner with borrower friendly, creative debt and equity structures. We created this niche in the business and we remain the leader. We know what it takes to get it done, and above all else, we care about you – the owner! 2
#8 The servicer has an incentive, or obligation, to look out for the owner’s best interest post securitization 4
Trustee Master Special Servicer Servicer Owner Lender Loan Documents Pooling & Servicing Agreement 5
The servicer acts on behalf of (and for the benefit of) the bondholders and the trust to ensure the continued performance and viability of CMBS by servicing the mortgage loans that constitute the collateral for the bonds. The responsibilities and obligations of the Master (or lead) Servicer are set forth in a Pooling and Servicing Agreement (“PSA”) that the Master Servicer enters into with the trustee and commonly includes the obligations to: • collect mortgage payments and transfer the collected funds to the trustee, who distributes them to the certificate holders; • advance any late payments to the trust; • provide mortgage performance reports to bond holders; 6
#7 The special servicer doesn't really want to own my property. As long as I have a good solution and new capital, they will want to work with me, rather than foreclose 8
2014 MODIFICATIONS 2014 DISPOSITIONS Original Balance Original Balance Modifications Loan Count Resolution Type Loan Count ($Mil.) ($Mil.) Combination 44 2,181.8 DPO 47 1,086.9 Maturity Extension 10 230.4 Paid in Full 8 35 Other 17 250.3 Note Sale 108 1,947.7 Amortization Change 8 65.4 REO Liquidation 314 5,714.9 Writedown 1 12 Total 79 2,727.9 Foreclosure 9 63.4 Repaid (Loss of Hope Note) 15 1,145.3 Total 502 10,005.2 9
EXAMPLE • In 2006, Borrower built a $59 million loan on a class A office building worth $80 million • 79% loan to value • Main tenant was a reputable home builder • Loan was securitized in 2006 • Loan was one of the 10 largest loans in the pool 10
THE MARKET • Market crash of 2008 • Until 2009, the property was nearly 100% occupied • In 2009, homebuilder company vacated the property, which left the property 60% vacant • Other tenants were requesting concessions and/or vacating • Loan transferred to Special Servicer in fall 2010 11
PROPERTY VALUE • Value of Property in 2010 was equal to $25 million • Down from $80 million in 2006 12
THE LAST OFFER • Keep principal balance as is • Begin payments on of interest only, at a rate of 2% • Suspend monthly principal payments • Waive default interest and late charges • Borrower would pay re-tenanting costs and cover any debt service shortfalls out of own pocket 13
FORECLOSURE OCCURED IN SUMMER 2011
TODAY • Property is owned by CMBS trust • Disclosed anticipated losses to bondholders approximately $45 million, and increasing • Property Not Sold Yet 15
#6 CMBS industry has strict standards, so it really doesn't matter which asset manager is assigned to my loan upon transfer to special servicer 17
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#5 CMBS restructuring is not like a poker game 20
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#4 If I can qualify for a new CMBS loan with no problem, I will certainly qualify to assume a CMBS loan 23
CURRENT PROPOSED Sponsor Property Manager Guarantor(s) Net Worth & Liquidity 24
#3 The economics of your property are one of the most important factors when modifying your loan 26
What Matters to an Owner What Matters to the Special Servicer Property repositioning REMIC rules Remain in control Liability to the senior bond holders Return of investment The status of their bond investment Minimal investment to return to performing NPV of all options available to them FMVPO 27
#2 There is no such thing as a loss of 182% to the bondholders for one property 29
LARGEST LOANS WITH LOSS SEVERITY GREATER THAN 100% IN 2014 Property Type State Loss Severity (%) Resolution Method Retail NJ 128.1 REO Liquidation Retail OH 102.0 REO Liquidation Office IL 110.9 REO Liquidation Multifamily FL 100.1 Sold at Foreclosure Retail TX 104.1 REO Liquidation Retail IL 131.8 REO Liquidation Hotel GA 157.6 REO Liquidation Retail PA 111.1 REO Liquidation Hotel LA 132.1 REO Liquidation MHC IA 106.2 Note Sale Office MA 112.6 REO Liquidation Multifamily IL 101.5 REO Liquidation 30
#1 It won’t cost you much to miss the payoff of your maturing loan by a few days 32
PROMISSORY NOTE Late Charge: If any part of the Debt (hereinafter defined) is not actually received by Lender by close of business on the fifth (5th) day after the date on which it was due. Borrower shall pay to Lender an amount (the "Late Charge") equal to the lesser of five percent (5%) of such unpaid portion of the missed payment or the maximum amount permitted by applicable law, to defray the expenses incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment. All such Late Charges shall be automatically due and payable without notice or demand and shall be secured by the Security Instrument and the Other Security Documents. 33
CONTACT 1 st Service Solutions, Inc. (817) 756-7227 www.1stsss.com Upcoming Webinars www.1stsss.com/webinar/
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