Commentary on the Commercial Real Estate Debt Markets, Economics, Politics and More.
Here in Boston, we’ve had a busy but productive week since the CREFC June Convention culminated –punctuated with more than a million hockey fans witnessing a parade of Duck Boats waddle through the Back Bay. The Convention itself saw a smaller (albeit similarly excitable) parade of lenders, borrowers, servicers and other industry participants descend on Manhattan for two days of networking, learning and discussion.
Continue Reading CREFC Convention Recap and Making Way For Duck Boats
Dechert LLP and Wells Fargo will be co-hosting the next CREFC After-Work Seminar on Tuesday, June 21 at the Omni Hotel in San Francisco. The topic of the seminar is "CMBS 2.0: A Securitization and Loan Level Perspective". The program will explore what’s changed, what’s stayed the same and what CMBS 2.0 means…
For many of us, an annual right of summer’s commencement, CREFC’s mid-year conference has begun in earnest for the last time in Manhattan (we’ll be in DC at this time next year). I’ll also note that for the second straight year, the conference’s first day coincides with Game 6 of a rather hotly contested playoff…
Greetings. What ever happened to those REMIC rules regarding property releases that we blogged and wrote about in 2009 (pdf) and 2010 (pdf)? The REMIC rules were revised in September 2009 to add flexibility to facilitate certain types of servicing transactions. However, under the new rules, if a property release occurs, the loan had to be retested to determine whether it continued to be principally secured by real estate (e.g., secured by no more than 125% loan-to-real property value ratio).
Quite a price for a bit more flexibility! This caused enormous consternation as it was promulgated during a massive cyclical downturn in real estate values which resulted in many properties not being able to pass the new “principally secured” test if a release occurred. And many loans contemplated such a release. In a bold recognition of reality, something not entirely common in regulatory circles, the IRS issued Revenue Procedure 2010-30 (pdf) establishing a safe harbor for certain “grandfathered transactions” and “qualified paydown” transactions. Under the Rev Proc, a loan would not lose its status as a REMIC “qualified mortgage” even if the “new” loan-to-real estate value ratio was in excess of 125% (i.e., if the loan was less than 80% secured by real property) so long as the loan was “grandfathered,” meaning that it was closed on or before December 6, 2010 (and not amended after that date).Continue Reading REMIC Rules Revisited: Got Compliant Property Releases?
This might not be man bites dog news, but in the structured finance world, it ranks pretty close. A U.S. bankruptcy court has ruled that a borrower can agree not to file bankruptcy.
It all starts with the development of a high-end condo project in Aspen, Colorado called Dancing Bear Aspen.
In December 2010, the Tenth Circuit Bankruptcy Appellate Panel affirmed a Colorado bankruptcy court order granting a motion to dismiss a bankruptcy petition filed on behalf of DB Capital Holdings, LLC (the “Debtor”) which developed Dancing Bear Aspen. The Court affirmed the lower court’s finding that the Debtor’s LLC Operating Agreement expressly barred the Debtor from filing for bankruptcy.Continue Reading LLC Operating Agreement Prohibiting Bankruptcy Filing is Enforceable
Early last decade, two Dechert partners, Tim Stafford and Dave Forti, published Mezzanine Debt: Suggested Standard Form of Intercreditor Agreement (pdf) in CMBS World. The article proposed a standard form of mortgage-mezzanine intercreditor that provided a portion of the bedrock upon which the architecture of CRE mezzanine lending would be built for the years to follow. At the time of its publication, burgeoning demand for mezzanine debt (and mezz lenders’ desire to create liquidity in their positions) had created a tension among mezz lenders, bond investors and rating agencies – the absence of a form ICA resulted in mezz debt being an inconsistent and pricey financing alternative. The CMSA (now CREFC) form ICA made mezz lending more predictable, less expensive and easier to trade. Continue Reading CMBS 2.0: Has the time come for an industry-form A/B Colender?
