Next week, hundreds of industry participants will make their way to our Nation’s capital for CREFC’s Annual Conference.   

The Conference promises to provide a forum to explore the effect of increasing financial instability in the Eurozone as well as the opportunity to develop important industry initiatives.  CREFC’s PSA Task Force will kick things off

Last Friday I moderated a panel at the 11th Annual IMN Real Estate Opportunity and Private Investment Forum in New York.  The two-day event consisted of about 40 separate concurrent panels and drew over 800 industry participants.  The topics covered revolved around distressed debt investing – loan workouts, exit strategies, tranche warfare and distressed asset sales. 

My panel‘s topic was “Loan -To-Own” strategies.  Our conversation began with the panelists discussing the common characteristics of successful loan-to-own transactions.  The common areas of focus included the importance of stringent property-level due diligence, exacting legal due diligence with respect to loan documents, a realistic understanding of foreclosure processes and timeframes, accurate modeling of acquisition and stabilization costs, and the importance of the local expertise that can be gained from local developers and operators.Continue Reading Distressed Debt Conference

CMBS 2.0 is coming, we hope (and pray). But boy, it’s taking its good time about it. Putting aside what our friends in Washington may or may not do to the structure of securitization, it’s remarkable to me how shy we in the industry (and its trade organizations) seem to be about putting a stake in the ground as to what CMBS 2.0 should look like. 

With CMBS 1.0, we built the airplane while flying it, so it’s hardly shocking that when tested, some things failed the stress test. On the other hand, we also did a great deal of fundamental work on an industry-wide basis in the early days, to make CMBS work. We created the IRP, the data dictionary and the like. Shouldn’t we do at least that much again?

Now that we’ve had a chance to observe the problems of CMBS 1.0 in the crucible of a wrenching recession, we seem mildly disinclined to take any dramatic action to address structural problems on an industry wide basis.Continue Reading CMBS 2.0

Note to File:

If you thought about it, when we take something as complicated as a pooling and servicing agreement and then modify it to do a work around changes to GAAP, it’s not going to be pretty. And it’s not. Welcome to the fair value auction. In a CMBS securitization, when a loan defaults, you’d figure the servicer would either work it out, foreclose it or sell it. That’s what we did until 2001 when the accountants concluded that, if the servicer had the ability to try to sell a mortgage loan, the trust would no longer be a qualified special purpose entity or a Q, and the securitization not a true sale. If it’s not a true sale, the mortgages stay on the issuer’s balance sheet and the transaction simply fails to work.Continue Reading Note to File re: Fair Value Auction

I’m just about to do another CRE Finance Council (formerly CMSA) PSA after work tutorial. A couple of observations. As a lawyer who packed the sausage casings, it is startling to see how much uncertainty and, in fact, misinformation exists about how a PSA actually works in the community of people who buy and sell bonds and other financial assets. Perhaps not surprising, because who reads these things, except the lawyers who draft them and a few anal B piece buyers, who really need a life? Continue Reading Time to Read that PSA