April 2013

As we have discussed numerous times in this blog (here, here, here and here), the downturn in the commercial real estate market resulted in much litigation as to guarantor liability for non-recourse debt. As a brief refresher, many of the non-recourse loans made during the CMBS boom included an agreement that, in an event of default, the lender would only exercise remedies against the property securing the loan and not against the borrower (or its principals or sponsors), with an exception for certain borrower “bad-acts” (such as misappropriation of rents, fraud, and in certain instances, borrower bankruptcy or insolvency). In the event the borrower perpetuated any of these bad acts, the guarantor agreed to be liable either for the losses incurred by the lender, or for the full amount of the loan, depending on the bad act committed.Continue Reading On Appeal: The Michigan Court of Appeals Overturns It’s Prior Ruling and Affirms the State’s 2012 Legislation, Nonrecourse Mortgage Loan Act, Which Invalidates Recourse Carveout Guaranties Triggered by Borrower Insolvency

A recent decision of the New York state appellate court has given hotel owners a new way to override contract provisions in long-term property management agreements and oust hotel managers from managing the property. In Marriott Int’l, Inc., et al. v. Eden Roc, LLLP, 104 A.D.3d 583 (N.Y. App. Div. 2013), the appellate court vacated a lower court’s imposition of an injunction requiring Eden Roc, LLLP (“Eden Roc”), the hotel owner, to allow Renaissance Hotel Management Company, LLC (“Renaissance”), the (now former) hotel manager and subsidiary of Marriott International Inc. (“Marriott”), to perform its role as manager of the hotel in accordance with the management agreement.Continue Reading Ace in the Hole: NY Court Gives Hotel Owner New Way to Oust Hotel Manager and (Re)Claim Management of the Property

I was entertaining myself early this morning by looking over a joint agency report just released entitled “An Analysis of the Impact of the Commercial Real Estate Concentration Guidance”. This report summarizes the performance of bank CRE portfolios following the issuance of interagency guidance in 2006 entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices”. Everyone will be shocked, shocked to know that through the course of the worst recession in post-war history, banks lost money because of commercial real estate exposure and many smaller and regional banks went casters up. Well, there’s startling news. We taxpayers pay for this sort of thing. Where is the sequester when we really need it?Continue Reading Undue Commercial Real Estate Risks Are Bad: The Mathematical Proof of the Blindingly Obvious

The Miami Heat’s home playoff games are not going to be the only events drawing attention to sunny Miami next week as IMN hosts its annual REO-to-Rental Forum in Miami. As we have previously discussed numerous times (here, here and here, and OnPoint Updates here and here), the REO-to-Rental asset class has become quite a hot topic and this conference is sure to provide invaluable insight into current trends in the market, as well as where market participants see this class of assets going over the near- and far-term.Continue Reading IMN’s REO-to-Rental Forum 2013: Welcome to Miami

The second annual IMN CLO and Leveraged Loan Conference returned to New York this past week. Building on last year’s momentum (discussed here), over 1,500 managers and investors, in addition to structurers, bankers, lawyers and other industry actors, filled the convention space at the Conrad Hotel, doubling last year’s attendance and causing standing room only conditions in the large downtown venue. Yes, many conference attendees were literally prevented by conference staff from entering the fully packed Conrad ballrooms.Continue Reading Second Annual IMN CLO and Leveraged Loan Conference Update

A recent decision out of the Bankruptcy Court for the Northern District of New York has brought greater certainty to the interpretation of what qualifies as an “interest” when determining the scope of a Section 363(f) “free and clear” sale in bankruptcy. The decision in In re Tougher Industries, Inc. became the latest in…

Last summer, we at Crunched Credit wrote (here, here and here) about Mortgage Resolution Partner’s (“MRP”), a San Francisco-based venture-capital firm, proposal whereby underwater performing residential mortgage loans held in private label securitization would be seized, refinanced, or restructured and sold to third party investors, with the government recovering the administration costs and MRP earning a fee on each transaction (the “Program”), which (or some version of which) was (and in some cases still is) being considered by, for example, the County of San Bernardino (which has dropped the idea), the City of Chicago (a decision on whether to move forward is still pending), Wayne County, MI (Detroit area) (Wayne County has dropped the idea), and the City of Salinas, CA (which has entered into an agreement with MRP to provide residential foreclosure data but has indicated that this agreement does not mean that they are considering the Program at this time).Continue Reading No Marriage for Mortgage Resolution Partners Yet (But Proposal Still Being Considered)

Terrorism insurance has been boring for the past several years. It risks becoming not boring. In the lee of the terrorism attack of 9/11, the Terrorism Risk Insurance Act, or TRIA, was rapidly passed by the Congress and signed by the President. TRIA provided a federal backstop for private terrorism insurance responding to the unwillingness of the private insurance market to provide meaningful terrorism insurance in light of the unpredictability of the risk and, therefore, perceived inability to price the insurance. TRIA was initially passed in November 2002 and reauthorized in 2005 and 2007. It expires on December 31, 2014. An extension is far from certain.Continue Reading Terrorism Insurance Redux