Saturday, May 22, 2010

Comings and Goings

CREConsole reports that Highland Mall in Austin (JPMCC 2002-CIB4) and Woodfield Corporate Center in Schaumburg, IL (NYLIM) are both going down. They're both interesting stories. Woodfield Corporate Center is owned by GE's Pension Fund and Lincoln Properties.

We previously commented on the fun lawsuits at Highland Mall between Dillard's and the owner - the departure of Dillard's will put the mall under officially and trigger co-tenancy clauses that will help bury it. CREConsole also noted that the mall was formerly a joint venture between Simon and GGGP - is that a harbinger of some sort?

Interest shortfalls continue to creep up. In fact, last month, the bonds that we own with interest shortfalls doubled. JPMCC 2008-C2 and CSFB 2005-C2 both experienced interest shortfalls at the AJ level. The LBUBS 2007-C1 AJ shortfall from the prior month apparently cured, albeit that might be temporary.

There are around 12k CMBS bonds out there, roughly, and currently 1,810 are experiencing interest shortfalls. That kind of puts in perspective.

Kilroy Realty (KRC), and yes I thought that was the name of the the thing Matt Damon put on his neck to attract Ellen Barkin in Ocean's 13 (that was a Gilroy though, it turns out), and no I have no idea who they are but I'll look into it, raised $250mm 10-year unsecured debt at +325 bps. That makes $7.35 billion across 18 transactions raised thus far in 2010!

John Hancock Center - 9% LBFRC 2007-LLFA

This is the second largest loan at 9% of LBFRC 2007-LLFA, and it just gained a new tenant for 20% of the NRA. That solves any problems with that property. Bain Capital is moving out of the BXP-owned Prudential Center according to DB research.

Tuesday, May 18, 2010

LNR - The Comeback Kid?

FT reports:

...a plan by private equity owner Cerberus Capital management to refinance its debt and to refocus operations could give LNR a new lease on life.


LNR recently bought controlling class-B pieces attached to three large CMBS – LB UBS 2007 C1, BACM 2006 5, and CSMC 2007 C1 – by outbidding incumbent servicer Midland Loan Services, according to the sources and remittance reports. For the USD 3.37bn CSMC 2007 C1 deal alone, 29 loans are in special servicing already with a balance of USD 559m, implying USD 1.4m of servicing fees based on a 25bps rate.


The B pieces of the three deals went up for sale in a late-January auction of six Class-B bonds just before the former owner, Anthracite Capital, filed for bankruptcy. Midland attempted to buy the bonds itself but LNR won out with a bid exceeding USD 2m for all six bonds, speculated a third CMBS investor at the time.

Sunday, May 16, 2010

We Are Nashville... CMBS loans.

I am a big fan of Nashville, although I'm an interloper and typically swoop in for a long weekend to see friends, listen to music, and live life. Nashville is different then the other places I've always liked to visit on a regular basis - it's full of real people (albeit some are of mythical proportions), it's a little grimy, there's southern-flavored hockey, pick up trucks the same age as me are prevalent, and jeans and cowboy hats are just as acceptable as tight leather and lip rings.

So, after a week of listening to the plights of friends & family, seeing pictures of destroyed vintage guitar collections, wondering about the hole-in-the-walls that I enjoyed over the years, curious how my favorite Rachels are doing... My wife, a former Nashvegas local, says to me this morning in the kitchen - "most of those places didn't have flood insurance". And, the lightbulb went off (two weeks late, but at least it still goes off occasionally) - CMBS exposure! Duh! Has anyone seen a good list from our well-funded sell-side research colleagues?

This is a very incomplete first cut - I'll have to work on this some more and will post some updates if anyone seems interested and as I get it together. After spending a couple of hours on this, I realize that the damage is far worse than I had anticipated, despite numerous descriptions from friends in the area. I really just assumed they were over-reacting given it was their backyard, but the lack of MSM coverage is astounding given the damage.

You can click here, for an interactive map of CMBS loans in Nashville. Click on the little pins for loan name and other info.

This map doesn't include all the loans outside of Nashville that are likely affected, and I didn't scrub the data for innacuracies or missing fields.

As you can see below, (Google earth plug-in care of PhillipGalbreath), the flooding really stomped on some areas, and then just skipped over others. Note that the map is incomplete. Downtown Nashville is all flooded, which is not shown well - LP stadium, the train stations, everything is underwater down there...

LP Stadium is a big bowl of Cumberland Soup

Here is a great picture of Rutledge Hill in BACM 2007-3 - it's on the left hand side in the background. Picture from kelseywinns.

This is all very incomplete. Hendersonville, for instance, was apparently slammed by the flood as well. I called a lawyer friend (if you can call lawyers friends) there today, but haven't heard back. It is East of Nashville.

Going southeast towards Murphreesboro, again, slammed hard by the flooding. I-24 was completely underwater with only the tops of vehicles visible in the news footage at the Blue Hole interchange. I saw some video footage of that exit - sorry no picture or link.

If you the owner of The Marketplace on Charlotte Pike in COMM 2004-LB4A, you might be screwed. Likely flooded, likely no flood insurance, and loan was performing.

On the other hand, if you're one of the 35 motel/hotel CMBS borrowers in the area including a number of Lightstone-owned ESAs, or Red Roof Inns, that were not performing and fortunate enough to have flood insurance, you may have just found your exit strategy.

Friday, May 14, 2010

Lakeforest Mall - BSCMS 2005-T20 $121mm

Reuters had a headline grabbing (give it time, it'll make its way up the headlines) story out today about a Simon Mall about to default.

Default, or not? Occupancy is rough at only 65%, but they're still covering at 1.74x. Any quick review of cash flows and the mall is likely worth far more than the 55% OLTV senior mortgage on it. The maturity date is July 2010, so the real problem is what is going to happen then - refinanced and paid off, or extended.

Seems like a tough call. If you use GGP as a guideline - highly performing assets, maturity dates looming - it will get modified.

The scary part is the special's comments where they apparently do not know the anchor tenants (none of which are part of the collateral). I refer them to the Mall's tenant directory and map.

Thursday, May 13, 2010

CWCapital suitors: Centerbridge, Apollo, Berkadia

From BBG:

May 13 (Bloomberg) -- Buyout firms Apollo Global Management LP and Centerbridge Capital Partners LLC made competing bids for CW Financial Services, parent of the second-largest manager of delinquent U.S. commercial real estate loans, according to two people with knowledge of the offers.
Berkadia Commercial Mortgage LLC, a partnership between Warren Buffett’s Berkshire Hathaway Inc. and Leucadia National Corp., was also weighing a bid for the New York-based company, said a third person familiar with the matter. The people asked not to be identified because the auction is private.
CWCapital Asset Management, a unit of CW Financial, is the special servicer of $143 billion of securitized real estate loans, including more than $18 billion that are delinquent, according to data compiled by Bloomberg. It has access to valuable pricing and payment information, said Ben Thypin, an analyst at researcher Real Capital Analytics Inc. in New York.

Wednesday, May 12, 2010

SL Green doing stuff

buying, selling, transacting... just stuff.

NEW YORK CITY-SL Green Realty Corp. says it will sell its ownership stake at 1221 Avenue of the Americas and a 45% joint venture ownership at 600 Park Ave. to the Canada Pension Plan Investment Board for approximately $663 million. The firm also reports it plans to acquire an office building on Park Avenue for more than $300 million.

Sell Mortimer, Sell!

Specials are coming out of the woodwork with CMBS loan portfolios for sale. First it was a hundred million there, a hundred million here, then LNR comes out in March with the $1billion portfolio announcement and the actual list in May (2 months?). Now we're seeing a $500mm and $300mm lists since the LNR lists from two others...

This is going to hurt those credit IOs. Well, we're going to see some accrued interest recapture real quick and some realized losses real fast - that'll help the lower mezz that are cusping on shortfalls but not potential principal loss and the short AAA stack - but that'll be followed by much shorter workout periods on loans.

Going into this CRE disaster the typical work out period was a little over 1 year (from 1st default to sale of asset), then the world changed and we all assumed it was going to average around 2 years, and now ... we need to focus on 2 month resolutions on already defaulted mortgages, and 6-8 month resolutions on newly defaulted loans.


Monday, May 10, 2010

Hartford "takes profits" on CMBS holdings...

Hartford, well known within the CMBS for chasing yield to the bottom of the barrel hoovering up any "AA" or "AAA" rated small balance deals (LASL, HCC, etc.), mezz loan deals (MEZZ), and carefully selecting only the worst AJ bonds available at the peak of the market, began to unload assets last quarter according to Bloomberg today.

To their credit, now does seem like a good time to sell, but I doubt most of those are profitable overall.

McGee cut Hartford’s investments in commercial mortgage-backed securities to 11.5 percent of fixed-maturity assets as of March 31 from 13.1 percent six months before.

CMBS makes up an average of 6% of your typical insurance company portfolio.

Friday, May 7, 2010

Liquidity Issues Solved in Singapore - Phew!

I don't have a login to SCI, but apparently the Singapore CMBS liquidity issues have been solved - no additional comment necessary.

Thursday, May 6, 2010

REIT Gains Mask Trouble Commercial Landlords Face

That's the headline from IBD's Joe Gose - the story stands on its own. There is nothing new there, but it's the first time I've seen a journalist (that may be too harsh a title - I don't regularly read anything from IBD, though I've always heard nice things) actually state a bunch of accurate facts. It's so unlike most News stories.

REITs are so overdone. I believe May marks a high point, and a downturn is coming...

Fat Finger or Not - CMBS impact

337 - 5/5 Close

357 - 11a

420 - 1:47p

360ish 5/6 Close

I left out the dozen or so very excited BBGs from one guy who was as giddy as Cramer and Burnett, but it was kind of an exciting afternoon in all fairness.

Monday, May 3, 2010

Movie Gallery Shifting from Chapter 22 to Chapter 7 Strategy

Movie Gallery is finally throwing in the towel. If you look across the CMBS universe, and take into account the square footage exposure per deal, only one deal has more than 0.20% exposure to this company. If you flip it over and look at it from a total loan exposure, you have several deals that exceed 1%.

Deals Loan Exposure
JPMCC 2006-CB17 9.12%
CASC 1998-D7 7.27%
GSMS 2006-GG6 3.60%
JPMCC 2007-LDPX 2.48%
JPMCC 2009-IWST 2.09%
CLRT 2007-2A 1.60%
LBCMT 1998-C4 1.29%
BACM 2006-3 1.27%
DMARC 1998-C1 1.27%
FUNBC 2001-C2 1.24%
LBUBS 2004-C6 1.06%
SCSC 2007-8 1.03%
CSMC 2006-C3 1.02%

That top one was on a bid list yesterday... wonder who bought that. Horrible timing, but probably not that big deal - it's mostly one huge loan that probably will not miss the Movie Gallery that much.

you can email me at credarkspace at gmail dot com if you want the entire list. I didn't pore over it with any real detail, but it should be relatively complete.

Sunday, May 2, 2010

$800mm Conduit - Chase/Ladder

Per Globe St.

JPMorgan Chase & Co. and Ladder Capital Finance are preparing to market an $800-million CMBS deal in June, Crain’s New York Business reported Friday. The conduit CMBS deal is backed by new loans both firms have made in the office and retail sectors, including $650 million originated by Chase, according to unnamed sources cited by Crain’s.

Reg AB Proposed Changes

Last month the SEC released a 667 page proposal that I've avoided reading because of the length and the proverbial stack of other reading material on my desk. Its come up in a number of conversations (mostly with attorneys) since, so I started today... some bullets below.

Off the Shelf Registration is no longer based on ratings from NRSROs, and can be eligible with

  1. a signature from the depositor's CEO stating that the assets in the pool have "characteristics that provide a reasonable basis to believe that they will produce.... cash flows to service any payments due and payable on the securities described in the prospectus."
  2. Risk retention by the sponsor of "each tranche" of the securitization - so, are they proposing the sponsor holds 5% of each tranche here? I don't think that works. In all fairness, I don't think retention works no matter how it is applied (sponsor simply values close to zero, passes costs along to investor, and there is nothing but upside). This really is ineffective though - the sponsor gladly takes on the 5% retention at the fattest part of the stack at the top, again values the lower retention pieces at zero, passes along costs to investor. The top of the stack goes on their balance sheet at par, probably stays there for the life of the loan paying out coupons that more than make up for the lower retention pieces.
    In the above example, based on a Subprime deal, the sponsor retains 5% of each tranche. A sponsor is going to look at this and say, well, the only classes really ever going to take a loss are M1 and down, so we're *really* only retaining 1.05%, the other 4.95% is top-of-the-stack investment quality tranches that we'd love to own anyway. They would be wrong - the highest rated class (3A1) is currently rated BBB- by S&P, nothing else is better than CCC or D, but nonetheless, it isn't going to have a mind altering change on how a sponsor treats the deal quality.
  3. Reps & Warranties reviewed periodically by a third party, funded by the obligated party

Other changes
  1. Extended filing deadlines to "allow investors with additional time to analyze transaction-specific information" to promote independent analysis of ABS by investors rather than reliance on credit ratings (if investors are still relying on credit ratings after what we've just been through, then they deserve to lose their money). Oh, and it's like 5 days...
  2. No more prosups, preliminary prospectus and final prospectus for each transaction
  3. Asset/loan level data via Python
  4. Disclosure of any reps/warranty or repurchase/replace breaches by the originators or sponsor in the past 3 years
  5. my favorite "additional information regarding originators and sponsors"
  6. Rule 144A and RegD may have contributed to the lack of access and sufficient time to evaluate investments - 144A & RegD are the definition of QIBs and AIs - if they felt like they didn't fully understand or didn't have enough time to analyze, THEY SHOULD NOT HAVE INVESTED IN THE FIRST PLACE. I have very little sympathy for this "poor me" investor tactic.
  7. 430D - substantially all information omitted from the preliminary prospectus would have to be filed in a final at least 5 days before closing.
Too long, stopped reading. I'll pick it back up though. Some of you will recall the idiotic requirements that made it through in the first Reg AB rounds, so I'm sure there will be some nuggets this time around as well.

Also worth noting that Cryptome had a copy of the rules too, dated as of 5/3 (tomorrow). I thought there might be something there, but didn't see anything different in their version.