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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?

Writing from the Acela again, en route to Back Bay Station after a short trip to New York to attend a CREFC After-Work Seminar we hosted. The space at our Bryant Park offices was full – I took a seat in the last row next to interim CEO John D’Amico (he seemed really pleased with the turnout). The meeting was the latest in a series of after-work seminars that CREFC is holding throughout the country (next stop is Dallas). The topic – “A Case Study in Lending from the Perspective of Both Portfolio and Conduit Lenders” – was moderated by Whit Wilcox (HFF) and included panelists Michael Shields (ING Real Estate Finance), Mike Doyle (CIGNA) and Schecky Schechner (Barclays Capital). The panel explored their thinking on loan applications from the perspective of the three corners of the CRE banking world – life insurance companies, bank balance sheet lenders and CMBS conduit lenders.Continue Reading Dechert Hosts CREFC After-Work Seminar

Earlier this month, the New York Supreme Court issued a decision upholding the enforceability of a springing recourse guaranty given in connection with a commercial real estate loan that provided for a full "blow-up" upon voluntary bankruptcy. [Author’s Note: the decision can still be appealed: New Yorkers tend to call their trial court the "Supreme Court", their supreme court the "Court of Appeals", their front steps the "Stoop" and their minor league team the "Mets".] Most of our readers are, at this point, intimately familiar with the "bad boy" guaranty and the leverage it provides a lender once the loan hits the fan. Conversely, our readers are also keenly aware of the degree to which sponsors were able to erode the scope of recourse carve outs and isolate liability in poorly capitalized shell entities during the go-go years. The most famous example, of course, being GGP’s ability to run an end-around the bad boy guaranty by filing borrowers and gurantors alike into bankruptcy in 2009 – leaving the holders of $ billions of CMBS paper without practical recourse.Continue Reading Bad Boys: New York Supreme Court Upholds Recourse Guaranty

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.Continue Reading TriBeCa 2.0: CREFC Prepares to Release Model Loan Seller Reps and Warrants

2500 of my best friends and I spent three days at the MBA’s annual CREF meeting in San Diego last week. By now, it’s old news, but, indeed, the mood was very upbeat. Just like the days of yore, everyone spent every working moment in lender-mortgage banker meet and greets, exchanging braggadocio over pipelines, products and relationships. People even had the energy to return to old fights and grudges: portfolio lenders vs Wall Street squaring off after sharing a fox hole these past three years. Most heartwarming.Continue Reading Tales From The Conference Circuit: Can I Be Both Giddy and Anxious?

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.Continue Reading CREFC Day 2: Tucker Carlson, Chuck Schumer and Dodd-Frank

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?

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.Continue Reading Can’t We Just Get Along