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My New Year began this past Monday morning with the following email from a client (a Giants fan): "Now that football season is over it’s time to get back to work". Not quite right for those of us here in New England, but I agree overall with the sentiment (albeit, with this year’s blizzard of year-end deals, not all of us were ever too far removed). Amid last week’s understandably slow news cycle appeared a story in Bloomberg on the growing desire in the private equity sphere for CRE mezz debt. Indeed, the stars seem to be aligning in a way that could mark 2011 as the beginning of a bull market for CRE mezz investors.
 Continue Reading Happy 2011 for Mezzanine Lenders?

Another item to add to the growing list of possible unintended consequences of financial reform in connection with ABS: Section 210(a)(11) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”)—Avoidable Transfers.

Here’s the who, what, where, when, why and how ABS are affected.

WHO? A “covered financial company” of which the FDIC becomes the liquidating receiver. Under the Reform Act, a “covered financial company” is a “financial company” as to which a “systemic risk determination” (such financial company is deemed to pose a significant risk to the financial stability of the U.S. upon its failure) has been made by the Secretary of the U.S. Treasury in consultation with the President. Entities most likely to be affected are non-bank “financial companies,” bank holding companies, and non-bank U.S. subsidiaries of either– if such subsidiary is in a financial business. An insured depository institution cannot be a “covered financial company.”
 Continue Reading Fa la la la la, la la, OLA

I’m writing from Pennsylvania Station on a particularly bad day for our national rail service (Amtrak) – apparently the heavy rains and gusts wreaked havoc with electrical wires running both North and South, delaying (or cancelling) every Acela, Keystone, Silver Meteor, Silver Star and Vermonter scheduled to leave our country’s busiest transport hub. The (woefully underrated) holiday movie Love Actually opens with Hugh Grant’s musing that when faced with the general gloominess of the world he considers the smiles of arriving Heathrow passengers as they greet their waiting loved ones. On this first day of December and first night of Hanukkah, however, I’m fearful that Mr. Grant would be sorely disappointed in the zeitgeist of the half-million or so travelers looking to depart for Stamford and Boston, Philadelphia and DC and the balance of the Northeast Corridor.Continue Reading Midnight Train to Boston: Dechert Speaks at IMN in NYC

Last Thursday – an archetypal rainy and windswept late October afternoon in New England (think orange and red leaves underfoot, Finny and Gene walking to class, etc., etc.) – I attended the annual Symposium offered by the Real Estate Council of Boston College . In attendance, perhaps one hundred and fifty lenders, developers, investors, lawyers, brokers, professors and priests. As someone that participates in a fair number of these things, I can’t say enough good things about the quality of the presentation coordinated by Cushman’s Rob Griffin and the balance of TREC members. Even the welcoming remarks – in this case by BC President Fr. William Leahy, S.J. – included a thoughtful recognition of the state of the CRE market (having, in the past 5 years, acquired more than 50 acres of prime real estate, commenced construction of a massive new academic building and committed the bulk of a $1.5b capital campaign to the construction of student housing, it’s clear this guy knows his way around a performance bond). His take – buy, never sell (not terribly surprising given his Boss’ investment horizon). 
 Continue Reading Cisneros Discusses State of CRE

On October 20th at the Charlotte City Club, Dechert partner David Harris spoke on an ASF Sunset Seminar panel titled “FDIC’s Final Securitization Safe Harbor – Understanding the New Rules.”  I won’t spend too much time on the background of the FDIC’s Old Safe Harbor Rule but will tell you that the Transitional Safe Harbor Rule continues to have a place even though we have a New Safe Harbor Rule (adopted on September 27, 2010), because the New Safe Harbor Rule extends the Transitional Safe Harbor Rule so that transfers of assets into securitizations made on or prior to December 31, 2010 are permanently grandfathered and not subject to the conditions of the New Safe Harbor Rule.  Following?
Continue Reading Securitizations: An Old Rule, a Transitional Rule and a New Rule (and we’re not talking Good, Better, Best)

Of the many stories that garnered national coverage during Tuesday’s midterm elections, Thomas Miller’s successful election to an eighth term as Iowa’s Attorney General went largely unnoticed by the talking heads at MSNBC and Fox. Miller is the point-man for the 50-state investigation into the burgeoning mess the media likes to call the “Foreclosure Crisis”. We’ve already learned about the dangers of RoboSigners (see Rick’s blog post), and the past weeks have seen a notable increase in coverage regarding a ubiquitous but heretofore relatively unknown company called MERS.

The Mortgage Electronic Registration Systems– a company essentially founded by industry participants (the GSE’s and some big-time private label issuers) – serves two primary functions. First, the company acts as record title holder of the mortgage (as nominee for the noteholder) and keeps track of the owner of the beneficial interests in the note. Second, in states where it is permitted, MERS will appear in court to execute the foreclosure process. Seems pretty innocuous – placing nominal title to a security interest in the name of a nominee for the benefit of the actual stakeholders in the debt. But in early October, a judge in Oregon stopped a foreclosure of a securitized sub-prime residential mortgage loan on the grounds that the assignment of a mortgage to MERS was ineffective because MERS didn’t hold the note – leading the judge to find that MERS lacked a cognizable interest in the property (I expect that this will not be the last we here with respect to this ruling). Then Jamie Dimon commented during an earnings call that his firm no longer used MERS, a story picked up by CNBC (turns out JP Morgan cut ties with MERS in 2008). The Times followed with a story last week detailing two recent scholarly articles by law professors at Utah and Georgetown that take issue with MERS from a public policy perspective.Continue Reading Foreclosure Crisis: Much Ado About MERS?

A recent Boston Magazine piece on Jack Connors (co-founder of Hill Holliday, Boston College alum and heir to the late Ted Kennedy’s position as city patriarch) noted, quite rightly, that the Hub is somewhat unique among major American cities in that no single industry dominates its cultural identity. In New York, Wall Street is (still) king. DC is lobbyists and Senate Bean Soup. Houston – oil; Los Angeles – alcohol monitoring ankle bracelets. (Not quite over the Lakers yet.) But Boston’s a bit odd – an amalgam of students, doctors, mutual fund managers, Democratic politicians and Democratic mobsters.

And let’s add commercial real estate to the list, as Boston may be among the first metro-areas to awaken from the malaise that has defined commercial real estate for recent memory. Last week – only days after announcing its acquisition of Bay Colony Corporate Center (a story covered here) – Boston Properties announced that it had come to agreement on the acquisition of the Hancock Tower, for $930 million, a stunning conclusion to a distressed-debt success story and the beginning of what some brokers are citing as evidence of a resurgence in demand for trophy office buildings. To give you a sense of the marketing and sale process, Rob Griffen of Cushman and Wakefield (Boston College, ’80) told the Globe that the bidding was “as fierce as anything [he’d] ever handled during [his] 30 years in this business.”
 Continue Reading Sale of Hancock Tower Completes Distressed Debt Turnaround

The final day of ABS East in Miami closed on Tuesday late afternoon and we’re back home with no suntans.

Those of us who didn’t overdo it on Monday evening (we won’t mention names) started Day 3 at a panel discussion titled “Lessons from the Financial Crisis: Required Steps for Rebuilding the Investor Base and Future Sources of Liquidity.”

Talking about RMBS, the consensus is that the economics just aren’t working for issuers, let alone the other impediments to getting deals done these days. Current interest rates on jumbo mortgage loans are too low. Over the next six months, however, at least one panelist thinks spreads will come in and the dearth of alternative investment grade securities that are attractive to investors will help the RMBS sector.

One panelist said that too much leverage cracked the world economy and if institutions become so highly levered again, it will happen again. Insofar as regulations are concerned, many of us agree with him that it is irresponsibility that needs to be regulated.
 Continue Reading ABS 2010 Concludes With High Winds and Little Sun

Dechert attorneys kicked off ABS East by hosting a Day 1 cocktail party at the Fontainebleau that was well attended by our friends and clients.

Day 2 of ABS East is underway. The Monday opening panel– Restoring Confidence and Rebuilding the Industry: The Role of Securitization– drew a pretty full house.

The general consensus is that the regulatory bodies are in the way and will cause delay in the recovery of the securitization market. I won’t go so far as to claim it wasn’t broke and didn’t need some fixing, but it’s clear the fixing to come is going to take a while. Without definitive rules, potential issuers can not evaluate the cost to enter the market. If we had a more targeted response to our problems from Congress and the regulators we could avoid this delay.

On the resi front, clearly the GSEs have crowded out private issuance, which has been facilitated by Congress and the Fed. Whereas commercial real estate found a natural bottom, the feeling is that resi never did. And, as one panelist put it, "distressed loans continue to pose a lingering cloud preventing meaningful recovery." The question was posed as to why there was nothing much after Redwood in the resi space. Again, the GSEs are dominating that space. Conforming loan limits have never been higher and it’s increasingly more difficult to even qualify for a jumbo loan under current underwriting criteria. With CMBS, it’s possible to get a reasonable number of loans. RMBS requires many more loans and there’s competition for the best loans.Continue Reading Live From the ABS East

We’re looking forward to ABS East October 3-5. More than 2,200 attendees are expected to gather at the Fontainebleau Miami Beach to discuss current topics in securitization.  Hot topics this year include Lessons from the Financial Crisis, Restoring Confidence and Rebuilding the Industry, the Role of Securitization in Revitalizing the Economy, Assessing the Changing Face…