CrunchedCredit : Capital Markets Finance and Real Estate Attorneys

As Philadelphians, it’s easy to think that 2012 has been a disappointment.  Our beloved Eagles are 4-9, the Phillies had the most disappointing season in recent history and the Sixers traded last year’s best player for someone who has not yet set foot on the court this season (to avoid any rage from hockey fans, we will omit any discussion of the state of the Flyers).

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Following a great evening with our clients and friends at the top of the Hay Adams, Conference Co-Chair Rick Jones kicked off Conference Day 2 here at CREFC with a panel on the slow-motion car crash that is the European sovereign crisis. And while the Bank runs,  a 100 billion in land loans, and GrexIt combine to paint a sobering picture for the next few months, we're all continuing to look for opportunities. Do we go from crisis to calm to crisis? Will Europe begin to federalize? Will investors in CRE eventually get used to the Euro ups and downs and just ignore it? Lots of questions, not many concrete answers.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Over 800 industry participants have descended on Washington D.C. for the CREFC annual conference. With CREFC's expanded focus on more than just securitization, we are now hearing from a more diverse set of voices at the conference. The conference kicked off this morning with the PSA Task Force's discussion of the pooling and servicing agreement simplification (not standardization) project. The discussion focused on the PSA Task Force's tremendous efforts to develop a uniform set of guiding principles and best practices for the servicing provisions in pooling and servicing agreements, while avoiding the internal hurdles posed by a standard form of PSA. Outside of securitization, the portfolio lending members continue to drive the first mortgage lending market and are now talking about chasing yield in the sub debt market. Throughout the day, we've heard a lot of talk about continued Euro uncertainty and a fragile US recovery - especially in light of events in Spain over the weekend. We look forward to engaging on all of these issues and their ongoing effect on the CRE market and seeing many of you at our dinner tonight at the top of the Hay Adams Hotel.

By: Matthew Ginsburg and Stewart McQueen

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Last Wednesday, Laura Swihart and I attended CREFC's after-work seminar on the new model set of representations and warranties, which the group is set to release in coming weeks. The model set is the product of a patchwork committee of 50-odd individuals representing the full gamut of industry types - securitization issuers, bond investors, rating agencies, servicers, wall street banks, life insurance companies, law firms, third-party providers and other interested parties. As a member of the committee, I’ll second CEO John D’Amico’s statement applauding the hard work of the committee. It takes a special group of people to stay energized through 90 minutes of heated discussion on the phrasing of property insurance requirements; the enthusiasm so many of my fellow committee members brought to each meeting and conference call was astounding.

The initiative is, in large part, a response to the SEC's new Exchange Act Rule 17g-7 (initially proposed last October and final rule released in January), which, among other things, requires that the rating agencies identify, on a deal-by-deal basis, deviations from industry-standard reps and warrants. CREFC hopes that the model set will serve as the basis upon which all deals will be judged. It’s not necessarily clear whether the model reps will be widely utilized by the market, or how the SEC rules will be implemented – deals have obviously been selling for over a year without industry-wide agreement on a form of reps and warrants.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

I'm sitting in the Grand Ballroom at the JW Marriot (filled to capacity) and listening to Tucker Carlson give his thoughts on likely GOP challengers to the President. I've seen him before - he did a great bit with Paul Begala a few years ago at the MBA in San Diego; very likable and very, very funny (told a great story about receiving a call from Donald Trump that I don't think I can reprint here). His early pick for the Republican nominee is New Jersey's Chris Christie.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The industry descended on our Nation's Capital this morning for the 2011 CREFC conference: "Commercial Lending: The New World Order". It was -2 at Logan when my shuttle took to the air - needless to say I'm more than happy for the opportunity to spend a few days with friends, clients and colleagues in a warmer climate. (Current DC temperature is 24 degrees - not quite Stone Crabs at Joe's, but I'll take what I can get.) 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

CREFC and MBA. MBA and CREFC. Tied at the hip. Danny Kaye and Bing Crosby? (For those of an age or inclination to have watched White Christmas recently). After a period of open and somewhat notorious and perhaps a little embarrassing competition, these two trade organizations have to settle down and get along for the benefit of the industry which they both serve. The good news is that the early indicators are positive.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Covered bond legislation is once again a hot topic on Capitol Hill. Representative Scott Garrett (R-NJ) co-sponsored the latest iteration of his proposed legislation (United States Covered Bond Act of 2010 or H.R. 5823 (pdf)) along with Representatives Kanjorski (D-NJ) and Bachus (R-AL). The House Financial Services Committee recently voted in favor of reporting H.R. 5823 to the full House of Representatives for consideration, which hopefully will be taken up for a vote this fall shortly after the August recess.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

It’s August 6 as I write this, and the finance industry is taking a deep breath after hustling for weeks to get their comments delivered to the SEC on the SEC’s massive restructuring (pdf) of Reg AB and offering reform.  We here at Dechert had been very busy writing the CREFC comments (pdf) and I’m delighted to see that effort coming to a close (it only took 24 drafts to get to our submission).

To be clear, this is merely the opening act of what will be a protracted insect dance between business and government to settle on rules that deliver on the SEC’s goals of transparency and alignment between issuers and investors while not imperiling the restoration of a healthy CMBS market.  This process will consume the time of many of us for the indefinite future.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Issuers, investors, rating agencies and other industry participants continue to wrestle with the fundamental changes that will come to define CMBS 2.0. Among the (many) issues raised in the "Best Practices" guidelines issued by CREFC during June’s get-together was a proposal for market-wide, programmatic change to the package of representations and warranties given by securitization issuers. Specifically, investors are calling for the formulation of a market standard list of reps and warrants, and for a standard procedure for receiving any deviations on a deal-by-deal basis. One would hope this would sate the appetite of the investing community – a community ravenous after being starved of ground lease exceptions and knowledge qualifiers during the lean years.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Earlier this week, Representative Scott Garrett (R-NJ) introduced an amendment to the proposed financial reform legislation that will establish a regulatory framework for a covered bond market in the United States.  The House side of the reconciliation committee quickly passed the measure - the Senate side is now considering it.  This development is welcomed news to a banking industry that has craved a covered bond market for some time now.  For our part, we've been examining covered bond structures since the advent of the credit crises as our clients continued to try to devise a workable structure, so we're very excited by this development. 

Covered bonds, which have been part of the European financing vernacular for over 200 years, function as a cross between an unsecured corporate bond and an asset-backed security.  Typically, a financial institution will issue a direct-recourse bond which is also secured by a specified pool of assets that remain on the financial institution's balance sheet.  These are attractive to investors for many reasons, most important of which is that the investor has recourse to a specified pool of assets in the event the financial institution becomes insolvent, unlike typical unsecured corporate bonds that depend solely on the issuer's credit.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

I write from CREFC’s annual do with my 800 or so best friends.  We are trying to party like it’s not 2009, and you know, we’re getting there.  The government’s still playing pin the tail on the regulatory donkey, Europe’s a mess, housing and employment are not ready for prime time, and the banking system hangover goes on.  Yet…JPM got a deal done, the bonds cleared, and pricing was… well, it’s been reported that they made a few bucks.

The CREFC convention kick off is the Monday night parties, of which yours truly was a host of the annual Dechert dinner.  Note I said parties with an “s”.  We’ve had a banker party drought these past few years. I see the return of the Street parties as a leading indicator of CMBS 2.0.  We cannot wish 2.0 into existence, but let’s face it:  A robust appetite for anything to invest in with yield measured in percentage points not basis points plus good vibes can a market revive.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This article was published by Matthew T. Clark and Stewart McQueen.

For 150 attendees, Day 1 of the 2010 CREFC Annual Convention ended with dinner hosted by Dechert at Shelly's Trattoria in Midtown.  We thought the turnout was exceptional, and it was great to be able to socialize and dine with so many of our clients and friends.

The sessions continued this morning.  The Investment-Grade Bondholders Forum included a spirited debate about best practices for a CMBS restart, including risk retention and streamlined information flow.  Another panel, entitled Color of Money: Raising Capital in the Current Environment - Challenges and Opportunities, was very well attended as panelists discussed the hurdles to successful fund raising in this market. 
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This article was published by Matthew T. Clark and Stewart McQueen.

The 2010 CREFC Annual Convention has begun in earnest.  Day 1 began for many attendees with a meeting of the Securities and Loan Investors Forum.  This meeting included a lengthy discussion of the Fair Value Purchase Option and a perceived conflict of interest existing when the special servicer holds the securitization's B Piece.  A short break was followed by a lunchtime address from Congressman Scott Garrett (R - NJ), who was vocal in his critique of the current drafts of Financial Reform Legislation that is presently the subject of Congressional reconciliation. We just left the Servicers Forum, which was led by Forum Chair Daniel Bober from Wells Fargo. The Forum is currently working to identify the lessons learned from the past 36 months and to suggest industry-wide changes as we re-imagine CMBS 2.0.  The panel discussed common document deficiencies, issues relating to decision making authority under pooling and servicing agreements and investor frustration.  Next on the agenda is the Opening General Session on CRE Fundamentals, including an overview of the current state of the CRE market and a look toward the second half of 2010.

Depicted in the photo are Dechert attorneys/ bloggers Matthew T. Clark (left) and Stewart McQueen (right) with Larry Kligman from Ventras Capital Advisors LLC

• Email This
• Print
• Comments
• Trackbacks
• Share Link

We’re looking forward to the 2010 June Convention of the Commercial Real Estate Finance Council (formerly the Commercial Mortgage Securities Association) next week at the Waldorf-Astoria in New York City.  From June 14th to 16th, over 700 lenders, borrowers, investors, fund managers, servicers, attorneys, and other industry participants will gather to discuss current topics in commercial real estate finance.  This year’s hot topics will include sourcing new capital, the ongoing role of government agencies and their effect on the marketplace, the re-emergence of securitization (CMBS 2.0) and whole loan markets and on-going opportunities for distressed-asset investment.  Thirteen Dechert FRE attorneys will be in attendance to participate, learn, and meet with our friends and clients.  We will be posting live updates on CrunchedCredit from the event.

Featured blogger Rick Jones will chair the CRE Finance Council PAC Advisory Committee meeting at 9:30am on Monday, June 14th. The PAC Advisory Committee is an essential part of the CRE Finance Council’s mission to promote the ongoing strength, liquidity and viability of the commercial real estate finance markets. Stay tuned for highlights from this and other forums!
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link