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How To Get Away With Murder in CMBS
We will show a case study of an actual murder
How To Get Away With Murder in CMBS We will show a case study of an - - PowerPoint PPT Presentation
How To Get Away With Murder in CMBS We will show a case study of an - - PowerPoint PPT Presentation
How To Get Away With Murder in CMBS We will show a case study of an actual murder Persons of Interest Person of Interest Master Servicer Responsibility is to service the loans in the pool through maturity, unless the Borrower defaults
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Person of Interest
Master Servicer
- Responsibility is to service the loans in the
pool through maturity, unless the Borrower defaults
- Manages the flow of payments and reserves
- Responsible for collecting and analyzing
financials and property information
- Process Borrower requests related to
performing loans
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Person of Interest
Special Servicer
- Selected by the Controlling Class / B-piece
buyer
- Upon default the loan is transferred to the
Special Servicer. They have a responsibility to resolve all defaulted loans
- Has approval authority over material
servicing actions, such as loan assumptions
- Has a duty to the trust and is subject to the
servicing standard - to maximize the recovery to the bondholders
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Person of Interest
Controlling Class “CCR”
- Most subordinate bond class outstanding at
any given point
- Play an active role in monitoring the
performance of each loan, make decisions
- n key asset issues
- Appoint and/or terminate the special
servicer
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Person of Interest
Rating Agency(ies)
- Rate each securitization
- Establish bond ratings for each bond class
at the time the securitization is closed
- Monitor the pool’s performance,
delinquency and potential loss and update the ratings for investors
- Any action that can potentially cause a
downgrade of any of the bond classes require Rating Agency approval
- Any action on the largest loan in the trust
frequently require Rating Agency approval
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Person of Interest
Bondholders
- Owners of loan holding rated bonds
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Person of Interest
Borrower
- The entity that owns the Property
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Facts
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The Loan
- In 2006, Borrower got 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 10th 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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Crime Scene
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The 1st Offer
$30 million 60 Day Closing All Cash
- Discounted Pay Off (DPO)
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The 2nd Offer
A Note = $30 million New Capital = $5 million B Note = $29 million
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The 3rd Offer
A Note = $35 million New Capital = $7 million B Note = $24 million
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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 Occurred in Summer 2011
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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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Did a Murder Occur?
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Who Dunnit?
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Person of Interest
Master Servicer
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Person of Interest
Special Servicer
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Person of Interest
Controlling Class “CCR”
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Person of Interest
Rating Agency(ies)
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Person of Interest
Bondholders
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Person of Interest
Borrower
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1st Service Solutions, Inc. (817) 756-7227 www.1stsss.com