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I’ve written extensively about the CRE CLO technology for a long time and why it is the best leverage technology across securitization markets.  With the sponsor typically holding up to 20% of the bottom of the capital stack, it represents the best alignment of interests between sponsor and investor.  For the sponsor, it provides unique…

If the wisdom of crowds has any validity (and there’s no real evidence that it’s any worse than the pontifical huffings of the chattering class), then there’s hope for 2023.  Optimism did itself proud at CREFC.  We’ll see if that optimism is recapitulated at SFVegas and at the MBA CREF meeting coming up in the…

On October 26, 2022, Dechert partners Laura Swihart and Stewart McQueen attended the CREFC Capital Markets Conference in New York City. Stewart gave opening remarks and Laura moderated a panel on the current housing market and its intersection with multi-family, single-family and build-to-rent properties. Laura and Stewart sat down with Law Clerks Jared Goldstein and…

It’s a rule around here that I don’t write on the same topic twice in a row because if you don’t get bored, I will.  I am making an exception this week to revisit last week’s blog about the industry’s failure to take on, or at least discuss, the considerable negative externalities of transferring our entire business from LIBOR to SOFR while we have time.  The problem, of course, and I recommend last week’s commentary for a more fulsome discussion (or screed), is that we are barreling toward a world in which trillions of dollars of floating rate debt will be based on an index that is not credit-sensitive and which may (and likely will) cause a transfer of value from the providers of capital to the users of capital.
Continue Reading It’s Time for The Industry to Engage on SOFR’s Voldemort Problem

Last week, over 4,200 of our closest friends met virtually for the annual January conference by the Commercial Real Estate Finance Council, which is usually held in Miami. While we have all learned to go without in the last year, going without seeing the “smart resort wear” of our colleagues was almost too much to bear. Thankfully, CREFC put together an informative and interactive conference – complete with a virtual lobby that played in between sessions featuring a guy on his cell phone walking in circles. Talk about realistic! Best of all, CREFC honored the real reason we attend conferences and provided a “virtual swag bag.” All in all, CREFC did the best they could under the circumstances and we agree that’s all we ask of anyone or thing at this point.
Continue Reading CREFC Annual Conference: The Virtual Edition

COVID-19 has driven anxiety over the LIBOR transition right off almost everyone’s top-of-mind list and yet the crisis is taking no notice of that lack of regard and soldiering on.  The ARRC continues to beaver away, generating guidance and advice and otherwise proselytizing the need to get on with it and be ready for transition on January 1, 2022.

But are the markets listening?  Look at our ardor!  Except for special situations, the use of SOFR, to date, has been a political and not an economic decision for those who have elected to use it.  There is little take-up in the real world and little enthusiasm for doing so.  And what’s with the huge whoops a few weeks ago when SOFR’s March to the Sea was interrupted when the Fed backed off using SOFR in the Fed’s new $6 billion aid program for small and mid-size businesses?  Run away! Run away!  Back to LIBOR!Continue Reading LIBOR: The Monty Python Parrot of Finance

Here is something helpful that has surfaced amidst the fallout, pain and confusion of the global COVID-19 crisis.  The implementation date for the all-too-simple in theory but not-simple-at-all in practice CECL accounting standard has been pushed back by the passage of the CARES Act for banks until the COVID-19 national emergency declared by the president ends or December 31, 2020, whichever is earlier.  In addition, an interim final rule released by the FRB, OCC and FDIC on Friday, March 27th, now provides an option to delay the effects of CECL on regulatory capital for two years (in addition to the original three-year transition period for banks required to adopt CECL during their 2020 fiscal year).  Banks opting to use both forms of relief would be subject to a modified transition period which would be reduced by the amount of quarters CECL was delayed due to the CARES Act.  No relief was provided for non-banks who are otherwise required to follow CECL.
Continue Reading CECL: The Ugly Pig Running Out of Lipstick

With apologies to Mr. Marquez for repurposing the title of his haunting book, it’s conference season here in CRE and ABS securitization-land and therefore a time to reflect (more Marquez) on the risks that the world will become more disorderly, or whether we will progress gently from a perfectly fine 2019 to 2020.  We attended CREFC in Miami, are currently attending MBA CREF in San Diego and SFA in Las Vegas (as mere vendors, we don’t get to go to Beaver Creek, more’s the pity). After having seen thousands of our best friends, we’ll have a pretty good sense of what the market thinks of 2020.  We’ve already published our outlook for the year, but now we test it against the wisdom of the crowd (or perhaps herd is closer to the mark).
Continue Reading Life in the Time of Conferences: CREFC, CREF and SFA

One of the good things about the 24/7 news cycle, perhaps one of its few positive externalities, is that it’s a boon for the pontification business. It enables all sorts of otherwise serious people to make fools of themselves day in and day out predicting generally gloomy stuff, as sunshine doesn’t sell.  As a card-carrying member of the chattering class, this empowers me to publish periodic outlooks about the future with little risk of any fundamental embarrassment.  It’s sort of a no risk undertaking, isn’t it?  If you happen to get something right (think blind cat finding dead mouse), you can claim to be a star.  If you get it wrong, well, everyone else got it wrong, too – and often on national television.

The other thing we’ve got going for us in the bloviating business is that we remain in fraught and friable times.  We are running short of good synonyms for shock and outrage and struggling to describe what might actually be viewed as extraordinary.  What really does extraordinary mean these days?  These make good times for the prediction biz.  It’s not much fun making predictions when not much changes.  Imagine that poor sod, talking to the Pharaoh during the Old Kingdom after reading many entrails,  I foresee…nothing really changing for 2000 years; more news at 11.

Unburdened by much of the way in data and little in the way of anxiety about getting it wrong, I’m ready to tell you all about 2020:Continue Reading 2020: An Outlook