DECEPTIONS hosted by: IN CMBS SPEAKERS Ann Hambly President - - PowerPoint PPT Presentation

IN CMBS

DECEPTIONS

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SPEAKERS

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Ann Hambly President & CEO 1st Service Solutions Rob Seidenwurm SVP of Legal Outreach 1st Service Solutions

Commercial Real Estate Advisors

Commercial real estate is no longer a relationship business. Owners often don’t have access to, or even know who the decision makers are on their loans. We provide advice and solutions for anything ranging from the addition or removal

• f collateral on an existing CMBS loan, to the most

complex loan restructure for all loan types, nationwide. We create a strategy for the owner based on their specific

• bjectives, including avoiding or delaying tax consequences

and blend that with the expectations/requirements of the particular Lender/Special Servicer. We also provide the

• wner with borrower friendly, creative debt and equity
• structures. We created this niche in the business and we

remain the leader. We know what it takes to get it done, and above all else, we care about you – the owner!

#8

The servicer has an incentive, or obligation, to look out for the owner’s best interest post securitization

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Trustee

Owner Lender Loan Documents Pooling & Servicing Agreement Master Servicer Special Servicer

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The servicer acts on behalf of (and for the benefit of) the bondholders and the trust to ensure the continued performance and viability of CMBS by servicing the mortgage loans that constitute the collateral for the bonds. The responsibilities and obligations of the Master (or lead) Servicer are set forth in a Pooling and Servicing Agreement (“PSA”) that the Master Servicer enters into with the trustee and commonly includes the obligations to:

• collect mortgage payments and transfer the collected funds to the

trustee, who distributes them to the certificate holders;

• advance any late payments to the trust;
• provide mortgage performance reports to bond holders;

#7

The special servicer doesn't really want to own my

• property. As long as I have a

good solution and new capital, they will want to work with me, rather than foreclose

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9 Resolution Type Loan Count Original Balance ($Mil.) DPO 47 1,086.9 Paid in Full 8 35 Note Sale 108 1,947.7 REO Liquidation 314 5,714.9 Writedown 1 12 Foreclosure 9 63.4 Repaid (Loss of Hope Note) 15 1,145.3 Total 502 10,005.2

2014 DISPOSITIONS

Modifications Loan Count Original Balance ($Mil.) Combination 44 2,181.8 Maturity Extension 10 230.4 Other 17 250.3 Amortization Change 8 65.4 Total 79 2,727.9

2014 MODIFICATIONS

EXAMPLE

• In 2006, Borrower built a $59 million loan on a class A
• ffice building worth $80 million
• 79% loan to value
• Main tenant was a reputable home builder
• Loan was securitized in 2006
• Loan was one of the 10 largest loans in the pool

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THE MARKET

• Market crash of 2008
• Until 2009, the property was nearly 100% occupied
• In 2009, homebuilder company vacated the property,

which left the property 60% vacant

• Other tenants were requesting concessions and/or

vacating

• Loan transferred to Special Servicer in fall 2010

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PROPERTY VALUE

• Value of Property in 2010 was

equal to $25 million

• Down from $80 million in 2006

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THE LAST OFFER

• Keep principal balance as is
• Begin payments on of interest only, at a rate of 2%
• Suspend monthly principal payments
• Waive default interest and late charges
• Borrower would pay re-tenanting costs and cover any

debt service shortfalls out of own pocket

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FORECLOSURE OCCURED IN SUMMER 2011

TODAY

• Property is owned by CMBS trust
• Disclosed anticipated losses to bondholders

approximately $45 million, and increasing

• Property Not Sold Yet

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#6

CMBS industry has strict standards, so it really doesn't matter which asset manager is assigned to my loan upon transfer to special servicer

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#5

CMBS restructuring is not like a poker game

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#4

If I can qualify for a new CMBS loan with no problem, I will certainly qualify to assume a CMBS loan

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CURRENT PROPOSED

Sponsor Property Manager Guarantor(s) Net Worth & Liquidity

#3

The economics of your property are one of the most important factors when modifying your loan

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What Matters to an Owner What Matters to the Special Servicer Property repositioning REMIC rules Remain in control Liability to the senior bond holders Return of investment The status of their bond investment Minimal investment to return to performing NPV of all options available to them FMVPO

#2

There is no such thing as a loss of 182% to the bondholders for one property

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30 Property Type State Loss Severity (%) Resolution Method Retail NJ 128.1 REO Liquidation Retail OH 102.0 REO Liquidation Office IL 110.9 REO Liquidation Multifamily FL 100.1 Sold at Foreclosure Retail TX 104.1 REO Liquidation Retail IL 131.8 REO Liquidation Hotel GA 157.6 REO Liquidation Retail PA 111.1 REO Liquidation Hotel LA 132.1 REO Liquidation MHC IA 106.2 Note Sale Office MA 112.6 REO Liquidation Multifamily IL 101.5 REO Liquidation

LARGEST LOANS WITH LOSS SEVERITY GREATER THAN 100% IN 2014

#1

It won’t cost you much to miss the payoff of your maturing loan by a few days

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Late Charge: If any part of the Debt (hereinafter defined) is not actually received by Lender by close of business on the fifth (5th) day after the date on which it was due. Borrower shall pay to Lender an amount (the "Late Charge") equal to the lesser of five percent (5%) of such unpaid portion of the missed payment or the maximum amount permitted by applicable law, to defray the expenses incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment. All such Late Charges shall be automatically due and payable without notice or demand and shall be secured by the Security Instrument and the Other Security Documents.

PROMISSORY NOTE

1st Service Solutions, Inc.
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